Labor Costing

Lecture-13 Main Ahmad Farhan (ACA)

Time Base Bonus Plans

Halsey Premium Plan. Halsey wire Premium Plan. Rowans Premium Plan.

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

Rowans Premium Plan Time saved = Standard time Actual time taken
Premium Rate = Time saved Standard time * 100

Bonus Pay = Premium rate * Normal wages

Example
Standard hours Completion time Time saved Hourly rate 40 hours 30 hours 10 hours Rs. 10 per hour

i. Halsey Plan ii. Halsey wire plan iii. Rowan plan

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

Effective Wage Rate

Bonus Pay Actual time given 350 30 = 11.667 per hours

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 = 30 300 + 30 = 330 Effective Wage Rate 330 = 11 p/hr 30

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

Effective Wage Rate

Gross pay Actual hours 375 30 = Rs. 12.50 p/hr

Piece Rate Base Premium Plans Straight Piece Rate plan Unit produced * Standard rate (p.u)

Example

Hourly wage rate = Rs. 50 One units produced = 30 minutes Normal production in 1 hour = 2 units 50 = 25 P.U Per Piece wages = 2 Per Piece wages x units manufactured 25 X 15 = 375

Piece Rate With Minimum Guarantee Time Base Wages A protections is given to the worker against low productivity and low wages caused by factors beyond their control.

Example Normal wage Rate Unit Rate Scenario 1- Actual product (8hours) 2- Actual product (8hours) Rs. 50 Per hours. Rs. 10 Per unit 20 units 50 units

Solution

Scenario-1
Time base wage guaranteed Piece rate base wages Guaranteed wages given 8x50 = 400 30x10 = 300 = 400

Scenario-2
Time base wage guarantee 8x50 = 400 Piece Rate base wage 50x10 = 500 Wages = 500

Differential Piece Rate Plans Tailors differential piece rate / Two piece rate plan Marix differential piece rate.

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

Marix Piece Rate

At below (Rs 10 80% standard rate) At Par (Rs 15 80%-100%)

At above (Rs 12 at above 100%)

Example Three workers A, B & C Standard out put 40 units Piece Rate 10 p.u A produced 25 units B produced 35 units C produced 45 units Calculate the wage rate by Tailor or Marix methods.

Solution
Standard out put 40 units A&B are below standard C is above standard units

Tailors Method.
A 25 x 10 B 35 x 10 C 45 x 12 By Matrix A 25 x10 B 35 x 12 C 45 x 15 = 250 = 250 = 540 = 250 Below 80% = 420 80%-100% = 765 Above 100%

Contribution By employer

The employer can be provide some benefits to employee. Provident Fund. Group Insurance. E.O.B.I benefits.

Entries

Employee benefit To Social Security To Provident Fund To E.O.B.I Fund

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