Official Suggested Answer
Idle time is the time during which no production is carried-out because the worker remains idle but are paid. In other words, it is the difference between the time paid and the time booked. Idle time can be normal or abnormal.
Situation Idle Time Treatment
The setting up time for the Normal idle It is treated as a part of cost of
machine in case of Direct time production. It is to be considered
Worker Mr. A while setting of standard hours or
standard rate.
Normal rest time, break time Normal idle It is to be considered for the
for lunch in case of Indirect time computation of overhead rate.
Worker Mr. B
Time lost due to breakdown Abnormal idle It is to be shown as a separate
of machines in case of time item in the Costing Profit and
Worker Mr. C Loss Account.
Source: ICAI Board of Studies. open source PDF ↗
Worked Solution
✓ VerifiedIdle Time refers to the time for which wages are paid to workers but no productive output is obtained. It is the difference between the time for which workers are paid and the time actually spent on productive work. Idle time results in a cost to the employer without any corresponding output, and therefore requires careful accounting treatment.
Idle time may be classified as Normal Idle Time (inherent and unavoidable in nature, expected in the normal course of operations) and Abnormal Idle Time (arising due to unexpected or avoidable causes, beyond the normal course of business).
Treatment of Idle Time in Cost Accounts:
(i) Setting up time for machine — Direct Worker Mr. A:
Setting up time refers to the time spent by a direct worker in preparing and setting up the machine before actual production commences. This is a normal and expected activity directly associated with production. Since Mr. A is a Direct Worker, this setting up time is treated as Normal Idle Time.
The cost of such idle time is included in the cost of production by inflating the overhead absorption rate or by treating it as a direct labour cost chargeable to the job/product. It is absorbed into the cost of the product as it is a necessary and unavoidable part of the production process. This ensures that the cost is recovered through the product cost without distorting profitability reporting.
(ii) Normal break time for lunch — Indirect Worker Mr. B:
A normal lunch break is an unavoidable and planned interruption in the workday. For Indirect Worker Mr. B, this time is treated as Normal Idle Time as it is inherent in the working schedule and anticipated in advance.
Since Mr. B is an indirect worker, his wages are already treated as factory overhead (works overhead). The cost of his idle time during normal lunch break is therefore absorbed into factory overhead and spread over all production units through the overhead absorption rate. No separate accounting entry is required for this idle time — it is simply included in the indirect labour cost forming part of the overhead pool.
(iii) Time lost due to breakdown of machine — Worker Mr. C:
Machine breakdown is an unforeseen and abnormal event that is not expected to occur regularly in the normal course of production. The idle time arising on account of machine breakdown is therefore treated as Abnormal Idle Time.
The cost of abnormal idle time is not included in the cost of production (as charging it to the product would distort product cost and misrepresent efficiency). Instead, it is debited to the Costing Profit & Loss Account (also referred to as the Abnormal Idle Time Account) and treated as a loss for the period. This treatment ensures that product costs reflect true production efficiency, and the abnormal loss is highlighted separately for management attention and control.
Summary Table:
| Situation | Worker Type | Type of Idle Time | Accounting Treatment |
|---|---|---|---|
| (i) Machine setting up time | Direct Worker Mr. A | Normal | Charged to product cost / included in prime cost or overhead rate |
| (ii) Lunch break | Indirect Worker Mr. B | Normal | Absorbed into factory overhead |
| (iii) Machine breakdown | Worker Mr. C | Abnormal | Written off to Costing P&L Account |
Write it like this
1The skeleton
- Open with a two-line definition + Normal vs Abnormal split — examiners mentally tick 'classification knowledge' in the first 3 lines; if it comes later, they assume you're padding.
- For each situation, write the label first — literally start the sub-answer with 'This is Normal Idle Time' or 'This is Abnormal Idle Time' before any explanation, because that label IS the mark.
- For Mr. A (direct worker, setting-up time): call it Normal → state cost is 'included in product cost by inflating the overhead absorption rate or treated as direct labour charged to job' — both routes exist, mention both to cover the examiner's expected answer.
- For Mr. B (indirect worker, lunch break): call it Normal → pivot immediately to the indirect-worker angle: his wages already sit in factory overhead, so idle time is 'automatically absorbed into the overhead pool' — this nuance is what separates a 6/8 from a 4/8.
- For Mr. C (machine breakdown): call it Abnormal → use the exact phrase 'written off to Costing Profit & Loss Account' and add one line that it is NOT charged to product cost to avoid distorting efficiency reporting — examiners reward that 'why not' sentence.
- Drop a 3-column summary table at the end — Situation | Type of Idle Time | Treatment — ICAI model answers almost always include this, and it guarantees marks even if your prose is slightly off.
2Examiner-rewarded phrases
3Common trap
Watch out — most students write the SAME treatment for Mr. A and Mr. B just because both are 'Normal Idle Time', completely missing that Mr. B being an indirect worker means his idle time needs zero separate treatment (it's already in overhead). Writing 'included in product cost' for an indirect worker will cost you marks even if your Normal/Abnormal classification is correct.