Page 151 - DCOM202_COST_ACCOUNTING_I

Unit 7: Remuneration and Incentives

Wednesday 9 9 x ` 20 =180 _ 180 Notes
Thursday 11 9 x ` 20 =180 2 x ` 40 =80 260
Friday 9 9 x ` 20 =180 _ 180

Saturday 4 4 x ` 20 = 80 _ 80
Total _ _ _
Illustration: A worker takes 6 hours to complete a job under a scheme of payment by results. The
standard time allowed for the job is 9 hours. His wage rate is ` 15 per hour. Material cost of the
job is ` 120 and the overheads are recovered at 15% of the total direct wages. Calculate the factory
cost of job under (a) Rowan and (b) Halsey system of incentive system.
Solution:
(a) Rowan Plan: H x R + [S – H /S] x H x R : 6 hrs x ` 15 + [9 – 6/9] x 6 x ` 15 : ` 90 + 1/3 x
` 90 : ` 120
(b) Halsey Plan: H x R + 50% [S – H] x R : 6 hrs x ` 15 + 50% [9 – 6] x ` 15 : ` 90 + ` 22.50 =
` 112.50
(c) Factory Cost:
Particulars Rowan Plan Halsey Plan

I. Material cost ` 120 ` 120
II. Labor ` 120 ` 112.50
III. Overheads 15% of direct wages ` 18 ` 16.80

Total I + II + III ` 258 ` 249.30

Illustration: Calculate the earnings of workers A, B and C under the Straight Piece Rate System
and Merrick’s Differential Piece Rate System from the following particulars.
Normal rate per hour: ` 5.40 Standard time per unit: 1 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
Solution:

Firstly, the rate per unit will have to be calculated, as in the example, rate per hour is given. This
is shown below.
Rate per hour: ` 5.40
Standard time per unit: 1 minute

Hence the standard time per hour is 60 units Normal piece rate per unit = ` 0.090
I. Wages under the Straight Piece Rate:
Worker A: 390 units x ` 0.090 = ` 35.10
Worker B: 450 units x ` 0.090 = ` 40.50

Worker C: 600 units x ` 0.090 = ` 54.00

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