Page 143 - DCOM202_COST_ACCOUNTING_I
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Unit 7: Remuneration and Incentives
Notes
Efficiency (%) Bonus (%)
67–70 5
71–80 7
81–90 10
91–99 15
100 20
Calculate total wage payment and cost of per unit under Emerson plan.
Solution: Statement for Total Wage Payment and Cost of Per Unit
Unit Time Rate per Daily Work Bonus Total Cost per
output hours hours wages capacity Percentage Amount wages unit (`)
(`) (%) (`) (`)
5 8 3 24 62.5 - - 24.0 4.8
6 8 3 24 75.0 7 1.68 25.68 4.28
7 8 3 24 87.5 10 2.40 26.40 3.77
8 8 3 24 100.0 20 4.80 28.80 3.60
10 8 3 24 125.0 45 10.80 34.80 3.48
(b) Gantt Task Bonus Scheme: This method combines time rates, high piece rates and bonus.
The day wage under this method is guaranteed. The main features of this method are:
Day wages are guaranteed,
Standards are set and bonus is paid if a work is completed within the standard
time,
Performance below standard is paid on the basis of time rate, and
Performance above standard is paid at high piece rate. The workers may also receive
bonus if the workers under him qualify for it.
The time and bonus rates are fixed for each work, and when a work is completed the
worker goes on with the next. Thus, this plan provides an incentive for efficient worker
to reach a high level of performance and also protects and encourages the less efficient
workers by ensuring the payment of their minimum wages in case their performance is
below the standard level.
Premium Bonus Schemes: The various schemes under premium bonus scheme combine time
wages with piece rates. There are three main schemes under this method:
(a) Halsey Premium Scheme: This plan was introduced by F.A. Halsey in the year 1981. It is a
simple combination of time and piece rate method. The main features of this scheme are:
Standard time is fixed for each work or operation,
Time rate is guaranteed and the worker receives the guaranteed wages, and
If the work is completed in less than standard time, a worker is paid a bonus of 50%
of the time saved at time rate in addition to his normal time wages.
The formula for calculating bonus and earnings is as follows:
Bonus = 50% of (Time saved × Time rate)
Earnings = Time rate × Time taken + 50% of (Time saved × Time rate)
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