Page 154 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes (b) The total wage costs and
(c) The wages cost of each good unit produced.
Particulars Worker A Worker B Worker C
Z ` 10 ` 16 ` 12
Units produced for production 2500 2200 3600
Time allowed for 100 units 2 hrs 35 minutes 3 hours 1 hour 30
minutes
Time taken 52 hours 75 hours 48 hours
Rejects 100 units 40 units 400 units
Solution: The computation is shown in the following table. Statement showing Bonus and Wage
Cost per Unit
Particulars Worker A Worker B Worker C
Units produced 2500 2200 3600
Rejects 100 units 40 units 400 units
Good units 2600 units 2160 units 3200 units
Time allowed for 100 units 2 hrs 35 minutes 3 hours 1 hour 30 minutes
Total time allowed 65 hours 66 hours 54 hours
Time taken 52 hours 75 hours 48 hours

Time saved 13 hours -- 6 hours
[Time allowed – Time taken]
Basic rate per hour ` 10 ` 16 ` 12

Statement showing Bonus and Wage Cost Per Unit [Continued from previous page]
Particulars Worker A Worker B Worker C
Basic Wages ` 520 ` 1200 ` 576
Bonus * ` 104 -- ` 64
Total wages cost ` 624 ` 1200 ` 640
Wages cost per unit of good units produced # ` 0.26 ` 0.56 ` 0.20

* Bonus is computed as follows.
It is given in the example, that the bonus is to be paid in the proportion of time taken which
the time saved bears to the time allowed.
For A, the time saved is 13 hours while the time allowed is 65 hours. This means that the
proportion of time saved to time allowed is 13/65 = 1/5 hours and hence the bonus is 1/5th
of basic wages i.e. ` 104
For B, there is no time saved and hence he is not entitled for any bonus.

For C, time saved is 6 hours while time allowed is 54 hours, which means that the time
saved is 1/9th of the time allowed. Hence the amount of bonus will be 1/9th of the basic
wages i.e. ` 64

# Wages cost per unit of good unit is computed by dividing the total wages cost by the
good units.
Illustration: XYZ Ltd. has introduced a Scanlon plan of incentive bonus for its employees from
the year 2006-07. The relevant information for three previous years is as follows.

148 LOVELY PROFESSIONAL UNIVERSITY