Page 148 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes From the above prepared comparative statement, the following observations could be drawn:
(1) Under Halsey system, with the increase in efficiency the bonus increases steadily. On the
other hand, under Rowan system, up to certain level of efficiency, i.e. where time saved is
50% of allotted time, bonus increases & then it begins to decline.
(2) More wages is earned by the worker under Rowan system than under Halsey system,
where time saved is less than 50% of the standard time. On the other hand, more wages
will be the earned by the worker under Halsey system than under Rowan system, when
more than 50% of the standard time will be saved. Same bonus may be earned by the less
efficient worker as well as by the more efficient one under Rowan system. Therefore, a
safeguard is provided against a loose fixation of standards by the Rowan system.
(3) The worker, if he can save 2/3 of the standard time, doubles his earnings per hour under
rd
Halsey system whereas earnings per hour can never be doubled under Rowan system.
(4) Under Halsey system, with a view to earning more bonuses, the quality of work may
deteriorate which may arise due to over speed in work. On the other hand, as there is
automatic check on the earnings under Rowan system, over speeding is arrested.
(5) Bonus under both the systems is the same, when the time saved is ½ of the standard time.
It may be concluded from the above observations that the Rowan scheme is better than the Halsey
scheme, provided no loose fixation of standard is there.

There are other premium bonus schemes also, like (a) Barth scheme, (b) Accelerating premium
bonus.
(a) Barth scheme: Time wage is not guaranteed under this scheme, i.e. wage is not provided
to the worker on the basis of time worked by him. By multiplying the square root of the
product of the time allowed & time taken by the hourly rate, his wages will be calculated.
Under this scheme, with the increase in efficiency, there is a fall in the rate of increase in
total earnings. The calculation of wages is not understandable by the ordinary workers;
still the beginners & unskilled workers prefer the scheme.
(b) Accelerating premium Bonus: There is generally no accepted formula under this scheme.
Own formula is made by the employer for each individual.

Task A company pays its workers a guaranteed wage of ` 10.00 per hour. In addition,
a bonus is paid for effective production and time saved @ ` 6.00 per hour. Calculate the
amount of wages and bonus earned by each of the following workers:

Worker Hours worked Standard output Actual output
A 40 80 units per hour 3,360 units
B 38 80 units per hour 3,648 units
C 40 80 units per hour 3,000 units

7.3 Prevention of Fraud in Wage Payment

One of the problems associated with wage payment is the possibility of fraud perpetuated by
workers. The following types of frauds are more commonly seen in the industries:

(i) Inclusion of dummy workers in the payroll of the industry,
(ii) Use of wrong rate of pay in the payroll statement,

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