Model Test – IPCC
LABOUR COSTING
SUGGESTED ANSWER
1. A skilled worker in XYZ Ltd. is paid a guaranteed wage rate of Rs. 30 per hour. The standard time per unit for a particular product is 4 hours. Mr.Been, a machineman, has been paid wages under the Rowan Incentive Plan and he had earned an effective hourly rate of Rs. 37.50 on the manufacture of that particular product. What could have been his total earnings and effective hourly rate, had been put on Halsey Incentive Scheme (50%) ?
Ans:
Let T hours be the total time worked in hours by the skilled worker (machineman P); Rs. 30/- is the rate per hour; standard time is 4 hours per unit and effective hourly earning rate is Rs. 37.50 then
Earnings = Hours worked × Rage per hour + (Timesaved /Time allowed ) × Time taken × Rate per hour
(Under Rowan incentive plan)
Rs. 37.5 T = T × Rs. 30 + [(4-T) /4 ] × T × Rs. 30
Rs. 37.5 = Rs. 30 + (4 – T) × Rs. 7.5
Or Rs. 7.5 T = Rs. 22.5
Or T = 3 hours
Total earnings and effective hourly rate of skilled worker (machineman P) under Halsey Incentive Scheme (50%)
Total earnings = Hours worked × Rate per hour + ½ Time saved × Rage per hour
(Under 50% Halsey incentive Scheme)
= 3 hours × Rs. 30 + ½ × 1 hour × Rs. 30 = Rs. 105
Effective hourly rate = ( Time earnings/Time Allowed)
Rs.105/3hrs
= Rs.35
2. Standard output in 10 hours is 240 units; actual output in 10 hours is 264 units. Wages rate is Rs.10 per hour. Calculate the amount of bonus and total wages under Emerson Plan.
Answer:
(i) Efficiency = Actual output / standard output, 264/240 = 110%
(ii) Since efficiency ≥ 100%, total wages under Emerson plan is calculated using the formulae:
Total wages = 120% of Time rate + 1% Bonus for every 1% increase in efficiency
beyond 100%
= {(10 hrs X Rs.10 per hour) X 120%] + 10% Bonus on Rs.10 per hour for 10 hrs
= Rs.120 + Rs.10 = Rs.130
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