()Wu atat

()Wok niohe 4 1 t mn
() Wuk allotd
()Wnk done anl appnv 4 ) unifs
(M) Te and unile allowed 4 unit per hnut
)Wnpu ae 1 per hrur
(A) Ionu 44 nf fime saved
Worke '7 woukvd hous a dny
aloulate the remuneation ol the woker n the hasis f
/) ley I'lan 40, Hnd (ii) towan Plu
AP
Nolution

2,000 units
Tme allowed lor 2,000 unils40 units per hr 500 hours

() Haley Plan
Time aved- 50 hra allowecd 40 hs aken 10 hours
Bnin wingen or 40 hrs taken 40 hrs 72 71 0
Bonu; 40%% of time saved 10
hrs40%% 125
Total wagen 71,000 100 -71,100
Rowan Plan
Wages for 40 hrn ( T25 -71,000

Bonun
Tmesaved
Time tisken Hourly rate
Time allowed
10Fhrs
40hrs 50 hr 25 200
Total wapges 1,000 200 1,200
Problemn 3.12 X cxecuteN piece of work in 120 hours as against 150 hours alloweu
him. His hourly rate is i0 and he gets a dearness allowance 30 per day of 8 hou
worked in addition to bis wugen. You are required to ealeulate
total wages reccived
under the following incentive sehemex
() Rowan Premium Plan, and
()Emerson's Elicieney Plun (CCPR

Solution
()RowHn Plan
Busic wages (120 hrs a)10)
1,200
 Labour Cost (Employee Cost) 3.47
D.A. (15 days R30)
Saved hours 150 - 120 300 450

Bonus= | 30 hrs x 120 hrs 10

150 hrs 240
Total wages
1,890
(i) Emerson's Efficiency Plan

Basic wages
1,200
D.A.
450
150 hrs
Efficiency 120 hrs 100 =125%
Bonus* (45% of 1,200)
540
Total wages 2,190
Under Emerson's efficiency plan, bonus up to 100% efficiency is 20% and from 101% to 125%,
it is 25%. Thus total bonus payable is 20% +25% 45%
=

of basic wages.
Problem 3.13 XYZ Ltd employs its workers for a single shift of 8 hours for 25 days in
a month. The company has recently fixed the standard output for a mass production item
and introduced an incentive scheme to boost output. Details of wages payable to the workers
are as follows:
) Basic wages/piece work wages at 2 per unit, subject to a guaranteed minimum wage
of T60 per day.
(i) Dearness allowance at R40 per day.
i ) Incentive bonus:
Standard output per day per worker 40 units
Incentive bonus upto 80% efficiency :Nil;
Incentive bonus for efficiency above 80% :T50 for every 1% inerease above 80%.
The details of performance of four workers for the month of April are as follows:
Worker No. of days Output
worked (units)
25 820
18 500

C 25 910
24 780
D
Calculate the total earnings of each of the workers (ICWA Inter)

Solution
Statement of Earnings
DA Incentive* Total earnings
Workers No. of days Output Basic wages
worked units

A 1,640 1,000 100 2,740

25 820 720 1,800
B 18 500 1080*
C 1,820 1,000 550 3,370
25 910
D 960 50 2,570
24 780 1,560
*Working Notes:
. B's piece work 500 2
wages
=
x
R1,000 only
He is thus paid minimum guaranteed wages = 18 days x T60 = R1,080

2. Calculation of incentive
Incentive

A's efficiency 820 units = 82%

100
25 days x 40 units

B's efficiency 500 = 69%

18x 40

910
C's efficiency = 91%
T550
25x40

780
D's efficiency = 81%
50
24x 40

Problem 3.14 Calculate the earnings of workers A, B and C under

Straight Piece Rate
System and Merricks's Multiple Piece Rate System from the following particulars:
Normal rate per hour 5.40
Standard time per unit I minute
Output per day is as follows:
Worker A - 390 units
Worker B - 450 units
Worker C- 600 units
Working hours per day are 8. (CA Inter)
Solution
Rate per hour 5.40
Wage rate per uniut = T0.09
Output per hour 60 units
Standard output per day of 8 hrs =
60 units x 8 hrs =
480 units
Earnings of workers under Straight Piece Rate
Worker A = 390 units x R0.09
35.10
B 450 units x F0.09
T40.50
C 600 units x O.09 54.00
Earnings of workers under Merrick's Multiple Piece Rate
System
Workers
A B C
390 450
Efficiency level in % X 100 K 100 60 00
480 480 480
Actual output
Standard output-x100
= 81.25%
93.75% 125
Applicable wage rate
per unit () 0.09 0.09+10% 0.09+20%

= 0.099 = 0.108
Earnings 390 units x
0.09|450 units x
0.099 600 units x 0.10
= T35.10 = T44.55 = R64.80
 Labour Cost Employee
Problem 3.15
lanm 3.15 In a
Cost) O 3.49
factory, payment of wage bonus
ave of time saved of time is
made to the workmen
allowed in the based on
Time saved (% of standard)
following scale:
Bonus (% of time
Up to 20%
10%
saved)
Above 20% upto 40%
Plus 25% of time
saved above 20%
upto 40%%
Above 40%
Plus 33% of time saved
beyond 40%
Calculate the earnings of a
worker who
time of 100 hours. The normal completes a job in 57 hours, against astandad
wage rate is 75 per hour.
(ICWA Inter)
Solution

Time saved =
100 -

57
43 hours
=

Normal wages =
57 hrs at F5
={285
Calculation of bonus
Time saved in hrs
Bonus hrs Rate
First Amt
20 20 10% =2 5 10
Next 20 20 25% = 5
5 25
Balance 3 3 x 33,% = 1
5
Total 43
40
Total earnings F285
=
40 =7325
Problem 3.16 An article passes through five hand operations as follows:
Operation No. Time per article Grade of Worker Wage rate per hour
15 minutes A 0.65
2 25 minutes B T0.50
10 minutes C T0.40
30 minutes D T0.35
20 minutes E T0.30
The factory works 40 hours a week and the production target is 600 dozens per week
repare a statement showing for each operation and in total the number of operators required.
the labour cost per dozen and the total labour cost per week to produce the total targeted

output. (CA Inter)

Solution
Statement of Labour Cost for Each Operation

Labour cost of Labour cost

Operation No. of operators
600 dozens per wveek per dozen
No. required for 600 dozens

45x 40 x 0.65 = 1,170 1,170 600 1.95

600 40 60
=
45

1,500 600 2.50

2 600xx25 75 75 x 40 x
0.50 = 1,500
40 60
Contd)
 3.50 0 labour ost (Emplovee Cos)

12 10
600 x X
30 30x 40 x 0.40 480
40 60 480 600

12 30
600 90 90 x 40x 0.35 = 1,260
40 60 1,260 500
12 20
5 600 60 60 x 40 x 0.30 =
40 60 720 720 600
1 29
Total 300 5,130

Problem 3.17 In a factory. Ram and Sham

of same material and at the
produce the same product using the same inmue
same normal wage rate.
Bonus is paid to both of them in the form of
normal time wage rate adjusted
proportion which time saved bears to the standard time for the by the
The time allotted to the completion of the product
product is fifty hours. Ram takes thirty hours and Sham takes
hours to produce the fom

product. The factory cost of the product for Ram is 3.100 and
Sham 3.280. The factory overhead rate is {12 for
per man hour
Calculate (i) Normal wage rate;
(ii) Cost of materials used for the product, and
(ii) Input of material, if the unit material cost is T16.
(B. Com. Hons. Delh
Solution
Ram Sham
Factory cost 3,100 3.280
Less: Factory overheads
Ram (30 hrs x T12)
360
Sham (40 hrs x F12))
480
Prime cost 2,740 S00
Difference in wages 2,800 -

2,740 =T60
Calculation of wage rate
Suppose wage rate = x

20
Wages of Ram 30x +30x 50

Wages of Sham = 40x + 4 0 10

S0
Thus the following equation is made
10 20
40x + 40x x
50 30x+ 30 S0
60

Solve this equation and derive the value of a,

(40x+ 8x) - (30x + 12x) = 60
48x42x = 60

10
Thus wage rate = R10 per hour
 Labour Cost (Employee Cost) 3.51

Wages of Ram =
30 hrs x 10 +
|30x 10x250 7420

Wages of Sham = 40 hrs x 10 + |40 x 10 x = R480

Material cost 50
Ram's job 2,740 420 F2,320
=

Sham's job {2,800 480 2,320

=

Material input =
R2,320 F16 =
145 units
Problem 3.18 On the basis of following
information, calculate the earnings of worker X and
Y on:

() Straight piece basis, and

(it) Taylor's differential piece rate
system.
Standard production 8 units per hour
Normal time rate R4 per hour
Differentials to be applied:
(a) 80% of piece rate below standard
(b) 120% of piece rate at or above standard
In a 9 hour day, X
produced 54 units and Y produced 75 units.
Solution
Standard output -

8 units per hour

Time rate 4 per hour
Piece rate F4 + 8 units 50 paise
-

per unit
=

() Straight Piece Rate System

Wages of X = 54 units @T50 paise = T27.00

Wages of Y = 75 units @T50 paise = {37.50

(ii) Taylor's Differential Piece Rate System
Lower piece rate -

80% of 50 paise 40 paise

Higher piece rate -

120% of 50 paise = 60 paise

At the standard rate of 8 units per hour, standard output for a 9 hours day should be 72
units. Output of X is 54 units which is below standard and therefore, a lower piece rate will
be used. For
Y, higher piece rate will be used because his output is 75 units which is above
standard. Thus:
Wages of X 54 units @40 paise = {21.60

75 units @ 60 paise = R45.00

Wages of Y
TOblem 3.19 Mr X, the proprietor of a small engineering workshop producing a speciality
product by employing 5 skilled workers, is considering the introduction of some incentive
neme-either Halsey Scheme or Rowan Scheme of wage payment for increasing the labour
roductivity to cope with the increased demand for the product by about 25 per cent. He
cels that if the proposed incentive scheme could bring about an average of 20 per cent
CTease over the present earning of the workers, it could act as suticient incentive for them
produce more and he has accordingly given this assurance to the workers.
As a result of this assurance, an increase in productivity has been observed as revealed
by the following figures for the current month:
3.52
Labour Cost (Employee Cost)
Hourly rate of wages (guaranteed)
Average time for producing 1 piece by 2.
worker at the previous performance
one

(Mr X desires that this time be considered

as time allowed for the
2hour
purpose of incentive scheme)
No. of working days in the month
No. of working hours
per day for each worker
Actual production during the month
You
625 Nes
required to: (a) Calculate effective rate of earnings per hour under Halsey Seh
are
and Rowan Scheme; em
(b) Calculate the savings to Mr X in terms of direct labour cost
per ni
under the above schemes;
(c) Advise Mr X about the selection of the scheme to ful piece
assurance.
(CA Inter
Solution
(a) Time allowed per unit (given) = 2 hours

No. of units produced

during the month = 625

So, total time allowed (625 x 2) = 1,250 hours

Actual time taken (25 x 8 x
5) = 1,000 hours

Time saved (1,250

1,000) -

250 hours
Bonus as per Halsey Scheme
50% of (Time saved x Time rate)
50% of (250 x 2) = 250
Per worker
= 2505 =50
Total wages per
worker Hours taken x Time rate
=
+ Bonus
200x 2+ R50 =7450
Effective rate per hour
= R450 200 hrs =

{2.25
Bonus as per Rowan Scheme Time saved
x Time wages
Time allowed
250
x 400 =
{80 per worker
Total wages per worker
1,250
200 x 2 +T80 480
Effective rate per hour =
T480+ 200 hrs =
2.40
(b) Labour costs per piece (without incentive) 2 x 2 = F4

Labour cost per 450 x 5

piece (Halsey Scheme) T3.60
Saving per piece = 4.00 3.60
625
= R0.40

Labour cost per piece (Rowan Scheme) 480x 5

3.84
Saving per piece = 4.00 3.84 625
= T0.16

(c) So far as labour cost per unit is concerned, it is about

clear that Scheme brings

more saving than Rowan Scheme. But Halsey Scheme doesHalsey not fulfil assurancc
the

workers about 20% increase in their earnings as it secures only 124% |1e 400
50 100

increase. Rowan Scheme, on the other 80

hand, secures 20% 1.e., x100 increase
the earning of the worker and it 400
fulfils the assurance.
Therefore, Rowan Scheme may be
adopted.
Problem 3.20 The llDouP Cost (
Aar in 60 hours,
standard time of
Akbar in 70 job X is
(Employe Cost) 3.53
100 hours.
hours and Th job has been
Thebonus system Anthony in 95 hours.
applicable to the job is as mpleted hy
Percentage of time saved to time follows:
allowed
Saving upto 10%
From 11% to Bonus
20% 10% of
time saved
From 21% to
40% 15% of time
From 41% to
saved
100% 20% of time
saved
The rate of pay is R15 25% of time saved
per hour. Calculate the total
rate of earnings per hour,
earnings of each worker
and also the
Solution (CA Inter)
Statement of Total Earnings and Rate of
Earnings Per Hour

Workers
Amar Akbar
Standard hours of job (Hrs)
Anthony
100
(A) Time taken on the job (Hrs) 100 100
Time saved (Hrs) 60 70 95
40 30
Percentage of time saved to time allowed 5
40% 30%
Bonus (as percentage of time 5/%
saved) 20% 20%
(B) *Bonus hours 10%
8 6
Total hours to be paid (4 + 0.50
B) 68 76
Total earnings @ 15 per hour 95.5
1,020 1,140 T1,432.50
*Earnings per hour 17 16.29 15.08
*Working Notes:
(i) Bonus hours = Time saved x Bonus%
(ii) Earnings per hour = Total earnings Time taken

Problem 3.21 Calculate the earnings of workers A and B from the following particulars for
a month and allocate the earnings of each to jobs X, Y and Z
B
(a) Basic wages () 100 100
(6) Dearness Allowance 50% 55%

() Provident Fund 8%
(d) Employees State Insurance 2
(e) Overtime 10 hours
16 hourss
Idle time and leave
200 hours, overtime is paid for at double
working hours for the month
are
.Ihe normal
Provident Fund
the contributions to State Insurance and
ormal rate plus D.A. Employer's
This month has 25 working days and one
Cat
equal rate with the employees' contributions.
paid holiday. Overtime was done on job Y.
 Cosf)
3.54 Labour Cost (kmployee
in the rolowing proportio
po ion
Y and Z
employed on jobs X,
The two workers were
Joh

30 30
40
20 30
50
B
(ICWA Inter, CA Inter
Solution
Workers A and B
Statement of Earnings of
A B

100 100
Basic Wages
Dearness Allowance 50 55
Provident Fund 8
State Insurance 2
Overtime 5

Total earnings 175 165

Hours Worked:
Worker A-Normal 200 hours B-Normal 200 hours
Add: Overtime 10 hours Less: Idle time and leave 16hours
210 hours 184 hours
Hourly rate:
Worker A-Normal (175 715) T160 200 hours = {0.80
Overtime 1510 hours T1.50
Worker B-Normal 165 184 hours = R0.90
Allocation of hours worked:

Jobs

X Y
Working hours of A
Normal 4:3:3
200 80 60
Overtime
10
Working hours of B 10
Normal 5:2:3
184 92 37
Total 394 172 107 115
Allocation of Labour Cost:

Total

A-Normal 0.80 per hour

Overtime 1.50 per hour 160 64.00 48.00 480

B-Normal 0.90 per hour 5

15.00
165 82.20 49.50
Total 33.10
340 146.20 97.50
96.30
 Labour (ost
mpiosee ot1} C 3.55
Preblem 3.22 An employee working under a bonus scheme
whh
the standa time is 60 hours. Calculate the 10 hours in job fot
rate per
saves
hour worked and
rket, if incentive bonus of T0% on the hourly rate i14 wages payahle
l 100
(pamely 100°% efficiency) is achieved and a further payable when standard time
incentive bonus of 1% on
for each 1
in excess of that 100% hourly rate
efficiency
is
payable. Assume that the normal
s 5 per hour. rate of
payment (CA Inter Adapted
Solution

Standard time allowed

60 hours
Actual time taken
50 hours
Time saved
10 hours

Std time allowed

60
Percentage efficiency = Actual time taken x100 = 50 100 =120°%
Calculation of wages payable
Basic wage rate per hour
5 00
Bonus
() 10% at 100% efficiency
0 50
(i) Additional 1% bonus for every additional 1%
efficieney
(20% of T5.00) 00
Hourly rate payable 50
Total wages payable = Actual hours x hourly rate = 50 6.50 - 7325

Problem 3.23 Calculate the total monthly remuneration of three workers P. and R who
are working in a factory, based on the following data:

(i) Standard production per month per worker. 2.000 units.

(i) Piece work rate: R0.50 per unit.
(i) Production bonus to be given as follows
Up to 85% efficiency Nil
Between 85% and 100°% Incentive bonus at ?40 tor every % ncrease

efficiency above 85

Incentive bonus al ?40 for every % nerease

Above 100% efficiency
above 8 plus 20% additional bonus on the

ncentive carned
2,000 unith and 200 unita reapectuvely
)P, Q and R production of 1,600
had a
units,
lCW4nier)
during January, 2012
Solution
During January 2012
Statement of Total Earaiugs
fotul
Worker Hages Efictena
Output urning
(units) 5 0 untt
00
800 0
I,600 20 I,120
2,000 1,000 0 3443
240
R 1,100
2.200
 3.56 0 Labour Cost (Employee Cost)
Working Notes:
For P No incentive, as his efficiency is below 85%
For
Efficiency is 15% above 85%. So for every 5%
increase,
i.e., total120. incentive
ForR
Efficiency above 85% is 25% that is for every 7o Increase
he
incentive @40, i.e., total 200 plus 20% = 240 wil.

Problem 3.24 In a
manufacturing concern, bonus to workers iS
paid on a slab rate
on cost
savings towards labour and overheads. The
following are the slab rates:
(i) Up to 10% saving, 5% of earning
(i) Up to 15% saving, 9% of earning
(iin) Up to 20% saving, 13% of earning
(iv) Up to 30% saving, 21% of earning
(v) Up to 40% saving, 28% of earning
(vi) Above 40%saving, 32% of earning
The wage rate per hour of 4
workers P, Q, R and S
are R1.00, 1.10, 1.20
respectively. Overheads are recovered on direct wages at the rate of 200%.
and 4 1

wages and overhead per unit of Standard cost under

unit each in 8, 7, 5% and 5 production is fixed at {30. The workers have completed one
hours respectively. Calculate in
(i) Amount of bonus earned respect of each worker
(i) Total earnings
(ii) Total earnings per hour

Solution (ICWA Inter)

Statement of Earnings of Workers

Workers P
R

(A) Wage rate per hour

1.00 1.10 1.20
(B) Time taken (in
hours) 140
8 7
(C) Wages (A x B) 5%
8.00 7.70
(D) Overheads (200% of wages) .60 . 00
16.00 15.40 13.20
(E) Wages and overheads (C + D) 14.0
24.00 23.10
(F) Savings (Standard Cost 30) .80 21.00
6.00 6.90 10.20 900
(G) % of savings on
standard cost
(H) Rate of bonus 20% 23% 34% 30°
earning 13% 21%
(1) Bonus (C x H) F 28% 21
() Total 1.04 L.62 1.85 47
earnings (C+ )* 9.04 9.3
(K) Total earnings per hour
8.45
(J B) R 1.13 I.33 1.54 I.69

Froblem 3.25 In
manufacturing unit, multiple piece rate plan
a
a
is
() Basic piece rate up to 85% operated as
u
(i) 115% of basic piece rate efficiency.
between 90% and 100%
(i) 125% of basic efticiency:
piece rate above 100% efficieney.
he workers
and the
are
eligible for a 'Guaranteed
Day Rate' which is equal to 75% etticic
piece rate is K2.00 per piece.
Compute the labour cost per piece at 5%
assuming that at 100% intervals between 65% and 125% en

efficiency, pieces are produced per day.

60 efe
(ICWAInter
 Labour Cost
(Employee Cost) 0 3.57
Solution

Ascertainment
-
of Labour Cost Per
Piece
Efficiency Output Piece Guaranteed 15% 25 Total
% per day wage @ Wages Additional Additional Wages
(units) 2 per wages per
wages wages
unit piece*

65 39 78 90
90 2.31
70 42 84 90
45 90 2.15
75 90 90 90 2.00
80 48 96
96 2.00
85 51 102
102 2.00
90 54 108 16.20 124.20 2.30
95 57 114 17.10 131.10 2.30
100 60 120 18.00 138.00 2.30
105 63 126 31.50 157.50 2.50
110 66 132 33.00 165.00 2.50
115 69 138 34.50 172.50 2.50
120 72 144 36.00 180.00 2.50
125 75 150 37.50 187.50 2.50

*Note: Wages per piece are total wages divided by the number of units of output.

Problem 3.26 Silverline Ltd operates a group incentive scheme. A minimum hourly ratei
guaranteed to each of the six employees in the group if actual output for the week is less
than the standard output. If actual output is greater than the standard output, the hourly
rate of each employee is increased by 4% for each additional 600 units of output produced.
The standard output for the group is 12,000 units for a 40 hour week. During the week ended
31 Dec., each employee in the group worked 40 hours; actual output and minimum hourly
rates were as follows:
Actual output Minimum hourly rate
Employee
(Units)
0.60
Ram 2,500
2,700 I.00
Hari
0.60
Mohan 2,400
0.80
2,500
Shyam 0.60
2,460
Hanuman
0.40
Krishna 2,440
You are required to:
) Calculate the earnings of each employee.
incentive scheme.
effectiveness to the company of this group
7) Appraise the (CA Inter)

Solution +2,460 +2,440

+ 2,400 + 2,500
Total açtual output = 2,500+2,700
= 15,000 units
= 12,000 units
Standard output
3,000 units
Additional output
 aour CoNt
(Enployee (Cost)
nerease in
wage rate for each 600 additional units = 4%
Total inerease 3,000
600
x 4%20%

Statement showing the Earnings of

Employees
(For the week ending 31 Dec.)
Employee Minimum Premium rate Total
rate per per hour rate per
Total wages for
hour the week
20% hour
(40 hrs
Ram 0.60 0.12 .72
Hari 1.00 28.80
0.20 1.20
Mohan 0.60 48 80
0.12 0.72
Shyam 80 0.16
28.8
Hanuman 0.96
0.60 0.12
38.40
Krishna 0.72 288
0.40 0.08 0.48 19.220
192.00
(ii) Appraisal of effectiveness Actual
cost of 15,000 units is
wages for 15,000 units is 192. Standard
labour
computed
as follow:

Rate per hour

payable to the group =
F0.60 + 1.00 + 0.60 + 0.80 + 0.60 040
=
F4 per hour
For 40 hours =
40 hrs x F4 =
F160 for 12,000 units
For 15,000 hours 15,000
=T160 12,000 = 200

There is a
saving of {8 (i.e., T200 192) and thus the group incentive scheme is effective
Problem 3.27 A company is undecided as to
what kind of scheme should be introdueeu
The following particulars have been compiled in respect wage
of three systems, which are unue
consideration of the management:

Workers
A B
Actual hours worked in a week
38 40 4
Hourly rate of wages R)
Production in units:
Product P
21
Product
36 135
Product R
Standard time allowed per unit of
46 25
each product is (in minutes): P
12 18 30
For the
purpose of piece rate, each minute is valued at RO.10
 the wages of each worker under
You arerequired t0 calculate
()Guaranteed hourly rates
basis
at 75% ot basIC pay (guaranteed hourly rate)
Piece carning basis, but guaranteed
work
less than 50% of basic pay.
if his earnings are
Rowan scheme
worker receives bonus based on
Premium bonus basis, where the
() (CA PE ID

Solution
rate basis
under guaranteed hour
() Wages
Actual hours Hourly rate Wage in 7 (Hrs Rate)
Worker
6.00 228.00
A 38
5.00 200.00
B 40
244 80
C 34 7.20

work earnings basis

(i) Wages under piece
Piece rate per minute
Std time per unit in minutes
x

Piece rate per unit

=

P 12 x 0.10 = F1.20
18 x 0.10 = T1.80

R 30 x 0.10 T3.00

Time allowed to each worker

+ (46 units x30 mts)
+ (36 units x 18 mts)
Worker A (21 units x 12
=
mts)
2,280 minutes (or 38 hrs)
25 units x 30 mts 75 mts (or 12.5 hrs)=

Worker B =

52 50 hrs)
18 mts)
=

3,150 mts (or

units x 12 mts) + (135 units x

Worker C =
(60
Statement of Piece Work Earnings

Worker B Worker C
Worker A
Products
60units a ti
20-?72
=7 25.20
P 21 units@71.20 135 units i s0 - 7243
7 64.800
36 units @ 71.80
=

R138.000 =
25 units
R 46 units a3.00 3 7755

75
Total 228.00
4 228 n d 315
as conputed above, ie

Aand C workers would be paid wages

would be paid I s0,
of the basic pay. he
775 are less than 50
However, wages of B, i.e.,
(ie., 40 hrs
e., 75% of basic pay of t200
ii) Wages under Rowan plan 58 hry tlc will get wage ur
is equal at
and actual ume
Worker A =Time allowed
To per hour)
228 (ie, 38 hrs
a

more than tune sllowcd ! $0 hra

hrs) s
Worker B = Actual time ( 40 hrs 5 per hrs)
wages on ume basis, i e, R200 (40
He will get
Actual te 4 brs13 5 br aved
Worker C Time allowed
52 50 hrs

1850hrs 34 hrs 7 20 -
o6 26
Bonus 52.50 hrss
331.06
244 80 86 20
-

Bonus
Total wages 34 hrs ?7 20
3.60 Labour Cost (Employee Cost)

Problem 3.28 Using Taylor's differential piece rate system, find the earning of A.
A from th
following partieulars:
Standard time per piece 12 minutes
Normal rate per hour (in a 8 hours day) 20
A produced 37 Units
(CA PE
Solution
8 hrs x 60 minutes
= 40 units
Standard output per day (8 hrs) 12 minutes
Actual output 100=- units x 100
Efficiency in % Std output 40 units
92.50%
Output per hour 4 0 units 8 hrs = 5 units

20
83% of normal rate BI% =
R3.32 per unit
5 units
As the efficiency is below 100%, normal rate of payment is applicable. Thus the earning
of A 37 units x T3.32 = T122.84

Problem 3.29 A skilled worker in XYZ Ltd. is paid a guaranteed wage rate of R30 per hour
The standard time per unit for a particular product is 4 hours. P, a machineman, has bee
paid wages under the Rowan Incentive Plan and had earned an effective hourly rate of F3750
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 Scheme (50%)?
(CA Inte

Solution

Under Rowan Plan

Hrs saved
Total Earnings = Hrs worked x Rate per hr +
Hrs taken Ka
*

St. hrs
Suppose T is the total time worked in hours by P

37.50 T = T x 730 + x T x 30

37.5 T =
30 T +4 Tx 7.5 T
37.5 T - 30 T =4 T x 7.5 T

7.5T 4 T
7.5T
I = 4- T

T 41
T = 3 hours.
Under Halsey Plan
Total Earnings =
Hrs worked
Rate per hr + (S0% of
x

= 3 hrsx R30 + (50% ofI hr x 30)

Hrs saved Rate
= R105

T105
Effective rate 35 per hour
hrs
 Labour Cost (Employee Cost) 3.61
Problem
a m 3.30
3.30 There are two piece workers, A and B who are
paid 5 for each piece of
work executed which costs T15 per piece in material.
ing
In a workin day of 8 hours, A can complete 4 pieces and B only 3. If the overhead
s 3re R1.50 per hour, show which of the two piece workers is more useful to the firm.
(ICWA Inter)

Solution
Statement of Comparative Cost
A B
4 units 3 units
Output
Materials @R15 per unii T60.00 745.00
Wages@ T5 per unit 20.00 15.00
Prime Cost 80.00 60.00
Overheads R1.50 per hours for 8 hrs 12.00 12.00

Total Cost 92.00 72.00

Total cost per unit 23.00 24.00

Per unit cost is lower in case of worker A. Therefore, worker A is more useful.

SUMMARY AND KEY TERMS

Labour cost, representinghuman resources, is the second most important
element of cost.
cost, there is a
On account of high share of labour cost in total production
and control of labour cost. Companies
special need for proper accounting
should take special care to reduce labour
turnover.

in the composition of the labour

The labour turnover is the rate of change
three methods of measurement of labour
force in a n organization. There are
method and tlux method.
turnover, i.e., separation method, replacement should
andcontrol of labour cost, a company
For a system of accounting and departure in the factory
record each worker's time of arrival
urately on different
time keeping) and also the record of the time spent
(known as
so that labour cost job ofeach
as time booking)
jobs or processes (known also needs
The problems of idle time and overtime
can be ascertained.
these in control
serious thought so as to keep which they
time lost workers, i.e., the time for
by
The idle time represents idle time is included in
n o production
is obtained. Normal transferred to
are paid but cost and is
time is not included in
cost but abnormal idle
Loss Account.
Costing Profit and works beyond
nornmal working hours.
when a worker and
Overtime occurs normal rate of wages
at double the
it is payable
Is a costly affair as
far as possible.
should be avoided as remuneration: (4) Time Rate
methods of labour their own
there are two these systems have
Basically, Both of
Piece Rate System. suitable in those cases
where
System; and (b) is generally
time rate system cannot be
measured in
merits and demerits,
and where output
more important
9uality of work is
quantitative termS.