Page 158 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes 6. The operating and administrative cost of the method of wages should be maximized.
7. There are five basic methods of wage payment or remuneration.

8. Under Piece graduated time rate method, workers are paid maximum wages on the basis
of time rates.
9. The piece rate is usually fixed with the help of work study.
10. In the Taylor differential method, piece rates were determined by time and motion study.

11. The time and bonus rates are not fixed for each work in Gantt bonus scheme.
Fill in the blanks:
12. According to fair ………………… the minimum wages must also provide for some measure
of education and medical, requirements and other amenities.
13. In India, the basic wage rates normally remain …………………
14. Under ………………… method, the efficiency of workers has a tendency to increase.
15. Under Straight Piece rate method ………………… for each job is ascertained first.

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Case Study Example of Remuneration/Incentives of TCF Info

The Company
A medium sized mortgage broker with 10 sales staff and 4 administration staff - two of
which handle complaints.

Current Practice
Currently the firm’s consultants earn commission for reaching sales targets, and bonuses
on top when certain milestones are passed. No other incentive system operates, but staff
are required to follow FSA rules on complaint turnaround times.
The TCF Problem
As a result of the sales incentive programme, consultants are encouraged to complete
as many sales as possible in a given timeframe. The risk to customers is that, in their
eagerness to meet targets, advisers may be tempted to sell a suitable product with which
they are familiar when there are others equally or more suitable available for the particular
individual in question. As a result customer choice – and therefore fair treatment – may be
compromised.

At the same time, opportunities to encourage other staff members to implement TCF are
being lost. For example, as things stand staff who deal with customer complaints have
no incentives to spot and report opportunities to improve service and reduce future
complaints. Their only incentive is to turn complaints around within the FSA timeframes.
TCF Solution

Sales
To encourage a more balanced approach to sales, the firm could include risk and service
performance targets in its rewards programme and make it known that it monitors sales of
individual product type against each adviser.

Contd…

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