Page 67 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting

Notes Halsey Premium Plan

Under this method, standard time for doing each job or operation is fixed and the worker is given
wages for the actual time to be taken to complete the job or operation at the agreed rate per hour,
1
plus a bonus equal to one half of the time saved. In practice, the bonus may vary from 33 % to
2 3
62 % of the wages of the time saved. Total earnings of the worker will be
3
TT × HR + ½ × TS × HR
TT = Time Taken
HR = Hourly Rate
TS = Time Saved
Time saved is the difference between Time Allowed (Standard Time) and Time Taken. Normal
wages may be ascertained and bonus may be added to arrive at total earnings.

Rowan Plan

Under this method, the worker is again guaranteed wages at the ordinary rate for the time taken
by him to complete the job or operation. The difference between Halsey plan and Rowan plan is
only in the calculation of the bonus. Bonus under this system will be calculated as:
TS/TA × Time Taken × Hourly Rate

The total earnings will be
TT × HR + [ (TA – TT) / TA] × TT × HR
TT = Time Taken
HR = Ho urly Rate
TA = Time Allowed
Alternatively:
Normal wages + Bonus will be total earnings.
Therefore, Normal wages = Time Taken × Hourly Rate
Bonus = (Time Saved / Time allowed) × Normal Wages

Example: From the following particulars, workout the earnings of a worker under:
1. Halsey premium system and
2. Rowan system
Standard time 10 hours
Standard Rate ` 2 per hour
Time Taken 8 hours
Solution:
Halsey Premium System:
Normal wages = Time taken × Hourly Rate
= 8 × 2 = ` 16.00
Bonus 50% of time saved.
1/2 × Time saved × Hourly Rate

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