Page 146 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes Group Bonus Schemes: In all the premium schemes discussed so far, the bonus payable to as
individual was ascertained. But bonus scheme for a group of workers working together may also
be introduced where:
(a) It is necessary to have a team work,
(b) It is difficult to measure the output of individual workers because the output depends
upon the combined effort of a team of workers, and
(c) It is required to reward not only the direct workers but also the indirect workers.
Types of Group Bonus Plans: Some of the group bonus plans are described below:

(a) Priestman’s Production Bonus: Under this plan, a standard is fixed in terms of units. If
actual output, measured similarly, exceeds standard, the workers will receive a bonus in
proportion to the increase. Therefore, this method can operate in a industry where there is
mass production of a standard product with little.
(b) Towne Gain Sharing Plan: According to this plan, 50% of savings in cost is paid to
individual workers in addition to their basic wages. In this plan the bonus is calculated on
the basis of reduction in labour cost. The supervisory staff may also receive a share of the
bonus.
(c) Scanlon Plan: Under this plan a constant proportion (ratio of wages to sales value) of the
added value of output is paid to the workers who are responsible for the addition of the
value. The added value is the change in market value.
Advantages of Group Bonus Schemes: The advantages of group bonus schemes are:
(i) It creates a team spirit for high output or high production,
(ii) It guarantees time wages to the members of a group,

(iii) Harmonious working in a group leads to increased output and lower cost of production,
and
(iv) It eliminates excessive waste of time.
Disadvantages of Group Bonus Schemes: The disadvantages of group bonus schemes are:

(i) The effort of more efficient workers are not properly rewarded,
(ii) The production of a group should be independent of any other group, and
(iii) It is difficult to fix the amount of incentive and its principle of distribution among the
workers.
Other Incentive Plans: Other incentive plans may be divided into two incentive plans:
(a) Indirect Monetary Plans: These plans are further divided into:
™ ™ Profit-sharing Plan: Under this plan, the employees are entitled, by virtue of an
agreement, to a share of profits at an agreed percentage in addition to their wages.
This type of plan recognizes the principle that every worker contributes something
towards profits and hence he should be paid a percentage thereof.

™ ™ Co-partnership Plan: Under this plan, employees are allowed to have a share in the
capital of the industry or organisation and thereby to have a share of the profit, when
co-partnership operates in conjunction with the profit sharing. The employees are
allowed to leave their bonus with the industry or organisation as shares or as a loan
carrying minimum interest.
(b) Non-monetary Plans: These plans are provided by the undertaking to make the conditions
of employment more attractive, and to promote better health and atmosphere in the

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