Cost & Management Accounting - MGT402 Power Point Slides Lecture 13

8/13/2019 Cost & Management Accounting - MGT402 Power Point Slides Lecture 13

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Labor Costing

Lecture-13

Main Ahmad Farhan (ACA)


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Time Base Bonus Plans

Halsey Premium Plan. Halsey wire Premium Plan.

Rowans Premium Plan.


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Halsey Premium Plan

Bonus pay = 50% of time saved x normal wage rate

Halsey Wire Premium Plan.

Bonus pay = 30% of time saved x normal wage rate


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Rowans Premium Plan

Time saved = Standard time Actual time taken

Premium Rate =Time saved

Standard time

* 100

Bonus Pay = Premium rate * Normal wages


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Example

Standard hours 40 hoursCompletion time 30 hours

Time saved 10 hoursHourly rate Rs. 10 per hour

i. Halsey Plan

ii. Halsey wire planiii. Rowan plan


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Solution

Halsey Premium Plan 50%

Normal wages = Actual time taken * wage rate

= 30 * 10 = Rs. 300

Bonus = 50% of time saved x normal wage rate

(50% * 10 hours ) 5 x 10 = 50

Gross wages = 50 + 300

= 350


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Effective Wage Rate

Bonus Pay

Actual time given

350 = 11.667 per hours

30


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Halsey Wire Premium Plan

Normal wages = Actual time taken * wage rate= 30 * 10 = Rs. 300

30% of time saved x Normal wage Rate

(30% * 10 hours) 3 x 10 = 30300 + 30 = 330

Effective Wage Rate

330 = 11 p/hr30


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Rowans Premium Plan

Basic wages = Actual time x normal wage rate

30 x 10 = 300

Time Saved = Standard hours-Actual hours taken

40 - 30 = 10

Time saved/standard time x 100

10 / 40 x 100 = 25%

300+(300 * 25%) = 375


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Effective Wage Rate

Gross pay

Actual hours

375 = Rs. 12.50 p/hr

30


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Piece Rate Base Premium Plans

Straight Piece Rate plan

Unit produced * Standard rate (p.u)


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Example

Hourly wage rate = Rs. 50

One units produced = 30 minutes

Normal production in 1 hour = 2 units50 = 25 P.U

2

Per Piece wages x units manufactured

25 X 15 = 375

Per Piece wages =


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Piece Rate With Minimum Guarantee Time Base

Wages

A protections is given to the worker against lowproductivity and low wages caused by factors beyond

their control.


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Example

Normal wage Rate Rs. 50 Per hours.Unit Rate Rs. 10 Per unitScenario

1- Actual product (8hours) 20 units2- Actual product (8hours) 50 units


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SolutionScenario-1

Time base wage guaranteed 8x50 = 400

Piece rate base wages 30x10 = 300Guaranteed wages given = 400

Scenario-2

Time base wage guarantee 8x50 = 400Piece Rate base wage 50x10 = 500

Wages = 500


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Differential Piece Rate Plans

Tailors differential piece rate / Two piece rateplan

Marix differential piece rate.


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Tailors Piece Rate Plan

Standard or at par

Below Standard (Quantity wise)

At standard

50 x 12 p.u = 600

Below standard

40 x 10 p.u = 400


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Marix Piece Rate

At below (Rs 10 80% standard rate)

At Par (Rs 15 80%-100%)

At above (Rs 12 at above 100%)


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Example

Three workers A, B & C

Standard out put 40 units

Piece Rate 10 p.uA produced 25 units

B produced 35 units

C produced 45 units

Calculate the wage rate by Tailor or Marix methods.


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Solution

Standard out put 40 units

A&B are below standard

C is above standard units

Tailors Method.

A 25 x 10 = 250

B 35 x 10 = 250C 45 x 12 = 540By MatrixA 25 x10 = 250B 35 x 12 = 420

C 45 x 15 = 765

Below 80%

80%-100%

Above 100%


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Contribution By employer

The employer can be provide some benefits toemployee.

Provident Fund.

Group Insurance.

E.O.B.I benefits.


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Entries

Employee benefit

To Social Security

To Provident Fund

To E.O.B.I Fund


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Entries

Employee benefit 10,000

To Social Security 3,000

To Provident Fund 5,000

To E.O.B.I Fund 2,000

Distribution employer benefit

Administration (25%) 2,500

F.O.H Cost (60%) 6,000

Selling Exp (15%) 1,500

To employees benefit 10,000

Documents

Cost & Management Accounting - MGT402 Power Point Slides Lecture 13