Employee Costing

Idle - Time
Q.1. 'X’ an employee of ABC Co. gets the following emoluments and benefits:
(i) Basic pay ₹ 1,000 p.m.
(ii) Dearness allowance ₹ 200 p.m.
(iii) Bonus 20 % of salary and D.A
(iv) Other allowances ₹ 250 p.m.
(v) Employee's contribution to P.F. 10 % of salary and D.A
'X' works for 2,400 hours per annum, out of which 400 hours are non-productive and treated asnormal idle
time. You are required to find out the effective hourly cost of employee 'X'.

Q.2. In a factory working six days in a week and eight hours each day, a worker is paid at the rate of 100 per day
basic plus D.A. @ 120% of basic. He is allowed to take 30 minutes off during his hours shift for meals-break
and a 10 minutes recess for rest. During a week, his card showed that his time was chargeable to:

Job X 15 hrs.

Job Y 12 hrs.

Job Z 13 hrs.

The time not booked was wasted while waiting for a job. In Cost Accounting, STATE how would you allocate
the wages of the workers for the week?
Q.3. A worker is paid ₹ 10000 per month and a dearness allowance of ₹ 2000 p.m. There is a provident fund
@ 10% and the employer also contributes the same amount as the employee. The Employees State
Insurance Corporation (ESIC) premium is 6.5% of wages of which 1.75% is paid by the employees. It
is the firm's practice to pay 2 months' wages as bonus each year. The numbers of working days in a
year are 300 of 8 hours each. Out of these the worker is entitled to 15 days leave on full pay. Calculate
the wage rate per hour for costing purposes.
Q.4. The present output details of a manufacturing department are as follows:
Average output per week : 48,000 units from 160 workers
Saleable value of output : ₹ 6,00,000
Contribution made by output
Towards fixed expenses and profile : ₹ 2,40,000
The Board of Directors plans to introduce more mechanization into the department at a capital cost of ₹
1,60,000. The effect of this will be to reduce the number of employees to 120, and increasing the output
per individual employee by 60 %. To provide the necessary incentive to achieve the increased output,
the Board intends to offer a 1 % increase on the piece work rate of ₹ 1 per unit for every 2 % increase in
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 average individual output achieved.
To sell the increased output, it will be necessary to decrease the selling price by 4 %.
Calculate the extra weekly contribution resulting from the proposed change and evaluate for the
Board’s information, the desirability of introducing the change.

Q.5. Calculate the earnings of workers A and B from the following particulars:
i. For a month,
ii. Ordinary Wage rate/hour of A & B.
iii. Allocate the earnings to each job, X, Y, and Z.:
Worker A Worker B
(a) Basic Wages ₹ 15000 ₹ 30000
(b) Dearness allowance 50% 50%
(c) Provident fund (on basic wages) 7% 7.5%
(d) Employees’ state insurance (On basic wages) 2% 2%
(e) Overtime 20 hours —

The normal working hours for the month are 200 hours Overtime is paid at double the normal wages plus
dearness allowance. Employer’s contributions to state insurance and provident fund are at equal rate with
employees’ contributions. The month contains 25 working days and one paid holiday. The two workers were
employed on jobs X, Y, and Z in the following proportions:
Job X Y Z
Workers A 75% 10% 15%
Workers B 40% 20% 40%
Overtime was done on job X.

Q.6. It is seen from the job card for repair of the customer's equipment that a total of 154 labour hours have been
put in as detailed below:

Worker 'A' paid at Worker 'B' paid at Supervisory

₹ 200 per day of ₹ 100per day worker 'C'
8 hours of 8 hours paid of ₹ 300
per day of 8 hours
Monday 10.5 hrs 8 hrs 10.5 hrs
Tuesday 8.0 hrs 8 " 8.0 hrs
Wednesday 10.5 hrs 8 " 10.5 hrs
Thursday 9.5 hrs 8 " 9.5 hrs
Friday 10.5 hrs 8 " 10.5 hrs
Saturday 8 " 8.0 hrs
Total 49.0 hrs 48 hrs 57.0 hrs

In terms of an award in a labour conciliation, the workers are to be paid dearness allowance on the basis of cost
of living index figures relating to each month which works out @ ₹ 968 for the relevant month. The dearness
allowance is payable to all workers irrespective of wage rate if they are present or are on leave with wages on
all working days.
Sunday is a weekly holiday and each worker has to work for 8 hours on all week days and 4 hours on

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 Saturdays; the workers are however paid full wages for Saturday (8 hours for 4 hours worked). Workers are
paid overtime according to the Factories Act for hours worked in excess of normal working hours on each day.
Excluding holidays (including 4 hours work to be put in on Saturday) the total number of hours work out to
176 in the relevant month.
The company's contribution to Provident Fund and Employees State Insurance Premium are absorbed into
Overheads.
Work out the wages payable to each worker.

Q.7. In a factory, the basic wage rate is ₹ 10 per hour and overtime rates are as follows:
Before and after normal working hours : 175% of basic wage rate
Sundays and holidays : 225% of basic wage rate
During the previous year, the following hours were worked :
Normal time : 1,00,000 hours
Overtime before and after working hours : 20,000 hours
Overtime on Sundays and holidays : 5,000 hours
Total : 1,25,000 hours
The following hours have been worked on job 'Z' :
Normal : 1000 hours.
Overtime before and after working hrs. : 100 hours.
Sundays and holidays : 25 hours.
Total : 1125 hours.

You are required to calculate the labour cost chargeable to jobs 'Z' and overhead in each of the following
instances:

(a) Where overtime is worked regularly throughout the year as a policy due to the labour shortage.

(b) Where overtime is worked irregularly to meet the requirements of production.

(c) Where overtime is worked at the request of the customer to expedite the job.

Q.8. GZ Ld. Pays the following to a skilled worker engaged in production works. The following are the employee
beefits paid to the employee:
(a) Basic salary per day `1000
(b) Dearance allowance (DA) 20% of basic salary
(c) House rent allowance 16% of basic salary
(d) Transport allowance `50 per day of actual work
(e) Overtime Twice the hourly rate (consider basic and DA), only if
works more than 9 hours a day otherwise no overtime
allowance. If works for more than 9 hours a day then
overtime is considered after 8th hour.
(f) Work of Holiday and Sunday Double of per day basic rate provided works at least 4
hours. The holiday and Sunday basic eligible for all
allowances and statutory deductions.
(g) Earned leave & Casual leave These are paid leave
(h) Employer’s contribution to Provident fund 12% of basic and DA
(i) Employer’s contribution to Pension fund 7% of basic and DA
The company normally works 8-hour a day and 26-day in a month. The company provides 30 minutes lunch
break in between.
During the month of August 2020, Mr. Z works for 23 days including 15th August and a Sunday and applied
for 3 days of casual leave. On 15th August and Sunday he worked for 5 and 6 hours respectively without lunch
break.
On 5th and 13th August he worked for 10 and 9 hours respectively. During the month Mr. Z worked for 100
hours on Job no. HT 200.
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 You are required to calculate:
(i) Earnings per day
(ii) Effective wages rate per hour of Mr. Z
(iii) Wages to be charged to Job no. HT 200.

Bonus

Q.9. X executes a piece of work in 120 hours as against 150 hours allowed to him. His hourly rate is `10 and he gets
a dearness allowance `30 per day of 8 hours worked in addition to his wages. You are required to calculate
total wages received by X under the Rowan Premium Plan.

Q.10.
(a) Bonus paid under the Halsey Plan with bonus at 50% for the time saved equals the bonus paid under the
Rowan System. When will this statement hold good?
(Your answer should contain the proof)
(b) The time allowed for a job is 8 hours. The hourly rate is `8. PREPARE a statement showing:
i. The bonus earned
ii. The Total earnings of the employee and
iii. Hourly earnings.
Under the Halsey System with 50% bonus for time saved and Rowan System for each hour saved
progressively.

Q.11. A factory having the latest sophisticated machine wants to introduction an incentive scheme for its workers,
keeping in view the following:
(i) The entire gains of improved production should not go to the workers.
(ii) In the name of speed, quality should not suffer.
(iii) The rate setting department being newly established are liable to commit mistakes.
You are required to PREPARE a suitable incentive scheme and DEMONSTRATE by an illustrative numerical
example how your scheme answer to all the requirements of the management.

Q.12. You are given the following information of a worker:

(i) Name of worker : 'X'
(ii) Ticket No. : 002
(iii) Work started : 1-4-2020 at 8 a.m.
(iv) Work finished : 5-4-2020 at 12 noon
(v) Work allotted : Production of 2,160 units
(vi) Work done and approved : 2000 units
(vii) Time and units allowed : 40 units per hour
(viii)Wage rate : ₹ 25 per hour
(ix) Bonus : 40% of time saved
(x) Worker X worked 9 hours a day.
You are required to calculate the remuneration of the worker on the following basis:
(i) Halsey plan
(ii) Rowan plan

Q.13. A skilled worker in XYZ Ltd. is paid a guaranteed wage rate of ₹ 30 per hour. The standard time per unit for a
particular product is 4 hours P, a machine man, has been paid wages under the rowan incentive plan and he had
earned an effective hourly rate of ₹ 37.50 on the manufacture of that particular product.
What could have been his total earnings and effective hourly rate, had he been put on Halsey Incentive

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 Scheme (50%)?

Q.14. Two workmen, 'A' and 'B', produce the same product using the same material. Their normal wage rate is also
the same. 'A' is paid bonus according to the Rowan system, while 'B' is paid bonus according to the Halsey
system. The time allowed to make the product is 50 hours.
'A' takes 30 hours while 'B' takes 40 hours to complete the product. The factory overhead rate is
₹ 5 per man hour actually worked. The factory cost for the product for 'A' is ₹ 3,490 and for 'B' it
is ₹ 3,600. Required:
(a) Compute the normal rate of wages;
(b) Compute the cost of materials cost;
(c) Prepare a statement comparing the factory cost of the products as made by the two workmen.

Q.15. Mr. A is working by employing 10 skilled workers He is considering the introduction of some incentive
scheme – either Halsey Scheme (with 50 per cent bonus) or Rowan scheme – of wage payment for increasing
the labour productivity to cope with the increased demand for the product by 40%. He feels that if the
proposed incentive scheme could bring about an average 20 per cent increase over the present earnings of the
workers, it could act a sufficient incentive for them to produce more and he has accordingly given this
assurance to the workers As a result of the assurance, the increase in productivity observed by the following
figures for the current month:
Hourly rate of wages (guaranteed) ₹ 40
Average time for producing 1 piece by one worker at the previous
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performance (This may be taken as time allowed) (hours)
25
Number of working days in the month
8
Number of working hours per day for each worker
1,250
Actual production during the month (units)
Required:
(a) Calculate effective rate of earnings per hour under Halsey Scheme and Rowan Scheme.
(b) Calculate the savings to Mr. A in terms of direct labour cost per piece under the schemes.
(c) Advise Mr. A about the selection of the scheme to fulfill assurance. Increase in worker’s earning coping
with increase in demand.

Q.16. Two workmen, A and B, produce the same product using the same material. A is paid bonus according to
Halsey plan, while B is paid bonus according to Rowan plan. The time allowed to manufacture the product is
100 hours A has taken 60 hours and B has taken 80 hours to complete the product. The normal hourly rate of
wages of workman A is ₹ 24 per hour. The total earnings of both the workers are same. Calculate normal
hourly rate of wages of workman B.

Q.17. A skilled worker is paid a guaranteed wage rate of ₹ 120 per hour. The standard time allowed for a job is 6
hours. He took 5 hours to complete the job. He is paid wages under Rowan Incentive Plan.
(i) Calculate his effective hourly rate of earnings under Rowan Incentive Plan.
(ii) If the worker is placed under Halsey Incentive Scheme (50%) and he wants to maintain the
same effective hourly rate of earnings, calculate the time in which he should complete the job.

Q.18. Wage negotiations are going on with the recognised Labour Union and the Management wants you as the Cost
Accountant of the Company to formulate an incentive scheme with a view to increase productivity.
The case of three typical workers Achyuta, Ananta and Govida who produce respectively 180, 120,and
100 units of the company's product in a normal day of 8 hours is taken up for study.
Assuming that day wages would be guaranteed at 75 paise per hour and the piece rate would be based
on a standard hourly output of 10 units, calculate the earnings of each of the three workers and the
labour cost per 100 pieces under (i) Day wages, (ii) Piece rate, (iii) Halsey scheme, and (iv) The Rowan

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 scheme. Also calculate under the above schemes the average cost of labour for the company to produce
100 pieces.

Q.19. The existing Incentive system of Alpha Limited is as under:

Normal working week 5 days of 8 hours each plus 3 late shifts of 3 hours each
Rate of Payment Day work: ₹ 160 per hour Late shift: ₹ 225 per hour
Average output per operator for 49-hours week 120 articles
i.e. including 3 late shifts
In order to increase output and eliminate overtime, it was decided to switch on to a system of payment by
results. The following Information is obtained:
Time-rate (as usual) : ₹ 160 per hour
Basic time allowed for 15 articles : 5 hours
Piece-work rate : Add 20% to basic piece-rate
Premium Bonus : Add 50% to time.
Required:
(i) Prepare statement showing hours worked, weekly earnings, number of articles produced and labour cost
per article for one operator under the following systems:
(a) Existing time-rate
(b) Straight piece-work
(c) Rowan system
(d) Halsey premium system
Assume that 135 articles are produced in a 40-hour week under straight piece work, Rowan Premium system,
and Halsey premium system above and worker earns half the time saved under Halsey Premium System.
(Nov. 2005)

Q.20. A workman’s wages for a guaranteed 44 hours week is ₹ 0.75 per hour. The estimated time to produce one
article is 30 minutes and under an incentive plan, the time allowed increased by 20 per cent. During a week, a
worker produced 100 articles.
Calculate the wages under: (a) Time rate, (b) Rowan system and (c) Halsey system.

Halsey
Q.21. The finishing shop of a company employs 60 direct workers. Each worker is paid `400 as wages per week of
40 hours. When necessary, overtime is worked up to a maximum of 15 hours per week per worker at time rate
plus one-half as premium. The current output on an average is 6 units per man hour which maybe regarded as
standard output. If bonus scheme is introduced, it is expected that the output will increase 8 units per man
hour. The workers will, if necessary, continue to work Overtime upto the specified limit although no premium
on incentives will be paid.
The company is considering introduction of either Halsey Scheme or Rowan Scheme of Wage Incentive
system. The budgeted weekly output is 19200 units. The selling price is `11 per unit and the labour hour and
the fixed overhead is `9000 per week.
Prepare a Statement to show the effect on the Company’s weekly Profit of the proposal to introduce (a) Halsey
Scheme, and (b) Rowan Scheme.

Q.22. JBL Sisters operates a boutique which works for various fashion houses and retail stores. It has employed 26
workers and pays them on time rate basis. On an average an employee is allowed 8 hours for boutique work on
a piece of garment. In the month of December 2020, two workers M and J were given 15 pieces and 21 pieces
of garments respectively for boutique work. The following are the details of their work:
M J
Work assigned 15 pcs. 21 pcs.
Time taken 100 hours 140 hours
Workers are paid bonus as per Halsey System. The existing rate of wages is 60 per hour. As per the new wages
agreement the workers will be paid 72 per hour w.e.f. 1st January 2021. At the end of the month December
2020, the accountant of the company has wrongly calculated wages to these two workers taking 72 per hour.
Required:
(i) Calculate the loss incurred due to incorrect rate selection
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 (ii) Calculate the loss incurred due to incorrect rate selection, had Rowan scheme of bonus
payment followed
(iii) Calculate the loss/savings if Rowan scheme of bonus payment had followed.
(iv) Discuss the suitability of Rowan scheme of bonus payment for JBL Sisters?

Q.23. A Company is undecided as to what kind of wage scheme should be introduced. The following particulars
have been compiled in respect of three systems, which are under consideration of the management:
Workers
A B C
Actual hours worked in a 38 40 34
week
Hourly rate of wages `6 `5 `7.20
Production in units
Product – P 21 - 60
Product – Q 36 - 135
Product – R 46 25 -
Standard time allowed per unit of each product is:
P Q R
Minutes 12 18 30

For the purpose of piece rate, each minute is valued at 0.10. You are required to calculate thewages of each
worker under:
(i) Guaranteed hourly rates basis
(ii) Piece work earnings basis, but guaranteed at 75% of basic pay (guaranteed hourly rate) his earnings are
less than 50% of basic pay.
(iii) Premium bonus basis where the worker receives bonus based on Rowan scheme.

Labour Turnover

Q.24. The following information is collected from the personnel department of ST limited for the year ending 31st
march, 2008:
Number of worker at the beginning of the year 8,000
Number of worker at the end of the year 9,600
Number of worker left the company during the year 500
Number of worker discharged during the year 100
Number of worker s replaced due to left and discharged 700
Additional workers employed for expansion during the year 1,500
You are required to calculate labour turnover rate by using separation method, replacement method and
flux method.

Q.25. Accountant of your company had computed labour turnover rates for the quarter ended 31st March, 2020 as
10%, 5% and 3% under Flux method, Replacement method and Separation method respectively. If the number
of workers replaced during that quarter is 30, find the following:
(i) The number of workers recruited and joined; and
(ii) The number of workers left and discharged.
(iii) Equivalent employee turnover rates for the year.

Q.26. The rate of change of labour force in a company during the year ending 31st March, 2020 was calculated as
20%, 10% and 5% respectively under 'Flux Method', 'Replacement method' and 'Separation method'. The
number of workers separated during the year is 50.
You are required to calculate:
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 (i) Average number of workers on roll.
(ii) Number of workers replaced during the year.
(iii) Number of new accessions i.e. new recruitment.
(iv) Number of workers at the beginning of the year.

Q. 27 The management of a company are worried about their increasing labour turnover in factory and before
analyzing the causes and taking remedial steps, they want to have idea of the profit foregone as - a result of
labour turnover in the last year.
Last year sales amounted to ₹ 83,03,300 and the profit-volume ratio was 20 per cent. Total numberof
actual hours worked by the Direct Labour Force was 4.45 lakhs. As a result of the delays by the
Personnel Department in filling vacancies due to labour turnover, 1,00,000 potentially productive hours
were lost. The actual direct labour hours includes 30,000 hours attributable to training new recruits, out
of which half of the hours were unproductive.
The costs incurred consequent on labour turnover revealed on analysis the following:
₹

Settlement costs due to leaving 43,820

Recruitment costs 26,740
Selection costs 12,750
Training costs 30,490
Assuming that the potential production lost as a consequence of labour turnover could havebeen
sold at prevailing prices, find the profit foregone last year on account of labour turnover.