TICH OF COSTING THEORY AND determine the desirability of allowing ov ering wy, he signature of a rexponsible office, if iti gay 230 +b) On the basis of the answers Specially authorise It under U to be undertaken. (e) Remove the causes wh future, d {d) Movertime work Is golog to be a permanent affair du machine, recruit extra men and instal new machines, ich are within control so that necessity does no fecur jp, 6 10 shortage of staff an if practicable, Wor Worked-Out Problems >roblom 1, ina fuetory, workers are paid on afferent! piece work system, the differentials applied are 8pm piece rate below standard and 120% piece rate ator ibove standard, From the following particulary calculate daily earnings of the workers A, Bund Ct ‘Standard production : 10 units per hour, Time rate : Re, 1-00 per hour, Production in g day of 9 hours : A 7S units ; B90 units ; C 110 units, Solution:: Standard production per hour 10 units und time rate per hour Re. 1:00 Normal piece rate: 21 = Re. 010 e Low piece rate below standard: “2 x Re. 0:10 = Re, 0:08 High piece rate at or above stundurd : ag x Re. 010 = Re. O13 Standard production per day : 9 x 10 = 90 units, A will get low piece rite while B und C will get high piece rate, Daily curnings : A 75 units @Re.008 per unit = Rs. 6-00 B WM 4 @ReOI2 . . = Rs. 1080 c oNO , @Reo2 , = Rs. 13:20 Problem 2. . ae From the following particulars, calculate earnings under dif(erential pie plece rates guarantced below stondsrd and the workers get 110% of tas and 120% efficiency and 120% of basi pieve rate ubove 120% efficiency. Standard production : 800 units per week of 48 hours, Basic piece rate : Re. 0:10 per unit. Produetion for the week A 720 units: 8 800 units : C880 units: O 1,000 units. Scanned with CamScanner‘anour Ss golutlor Percentage eTicieney of Individual worker . 720 a- Fe X10 = 90% p- SB x100 = 100% ic £89 x 100 = Now 1,000 D— qq * 100 = 125% {i Piece rate applicable to individuat worker: 100 , : A= oq *Re- 010 Re. 010 per unit guaranced baie pice rte) 10 Ock B— 79g XReOlD=Reou . 10 ; — WO xRed10= CH jog XREOHW=REOH 120 : ; D— joy XREOW=Re012 (i) Earnings per week : A— 720 units @ Re:0-10 per unit = Rs. 7200 Be 800. @Red . = Rs. 88:00 C— | 880. @Re Ol Rs. 9680 D- 1,000 @ROl . Rs. 12000 Wes ‘ Problem 3. Vy. . Calculate the ‘carnings of workers A, B and C under Straight Picce Rate system and Merrick’s Multiple Piece Rate system from the following particulars : Normal rate per hour Standard time per unit Output per day is as follows : Worker A Worker B "Workerc | * Working hours per day are 8. » Rs. 5-40 1 minute, 390 units 450 600, ICA, Inter. May ’98] Scanned with CamScanner“An organisation operates THEORY AND PRACTICE OF COSTING solution Earaings wd Normal time nate per hour ‘standard output per hour @ piece Rute System : 1 Sinaight Piece Rate Syste hasan {unit per minute 1 unit 60 = 60 unig Rs. $40 p Piece rate per unit Mani =R.009 390 units @ Re. 0-09 = Rs. 35:10 E of A a @ Re. 0.09 = Rs. 40507 a 450 , ce 600 @ Re, 0:09 = Rs. 5400, der Merrick's Multiple Piece Rate System . Earnings nnd Standant output per day of 8 hours 60 units x 8 = 480 units, Percentage efficiency of individual worker Actual output a) (SS output 1) Shemotarel owkpak 4 Bx io=si75% unity portor X Tole tox a £2 x 100=9375% + 69X83 cB x 100= 125-00% = 130» Piece rate applicable to individual worker : A Re,009 "(normal rate up to 834 % efficiency) B Re, 0.099 (110% of normal rate between 83-4 % and 100% eticiency) C Re. 0-117 (130% of normal rate above 100% efficiency) Eamingsof A» 390units @ Re, 0-09 Rs. 35-10 B 450, @Re.0-099 5. 44-55 C 600. @ReOll7 | =Rs. 70-20 Problem 4, a individual premium bonus scheme in which an operative's pert mance is calculated and paid for as follows : Each task is given a target ‘expressed in standard minutes. The quantity of weekly output achievedis stated in terins of total of standard minutes. The week's total of standard minutes is expressed 22 Percentage of atendane ime 1 the nearest whole number). The operators paid: Percentage performance Rate paid per hour o- 3 : Rs.220 6 —~ 9 Rs. 2-40 1 — to Rs. 2:80 11 and over Rs. 3-40 Three products are assembled and have the following standard times : Product A 42 sta i aren 3 standard minutes Produet ¢ sf Scanned with CamScannerLaBous 253 i. fe CCaleutate the gross Pay for ech operator from the following information ; Operator Hours attended Performance Products assembled P 8 A 8 c Q 0 Is 13 " R a: eo 15 18 16 ‘Solution = (a Standard hours of actual output : Operator P “ 15x42= 630 ‘minutes 3x60= 739 Mx75= a5 7 minutes + 60= 37-25 hours OperatorQ 1S x42 = minutes : 10x 60= i 8x75= a 1,830 minutes = 60 = 30-5 hours Operator R, 15% 42=- 630 minutes 18x60= 1,030, 16x75= 1200 7 ao . 2,910 minutes + 60 = 48:5 hours G@) Standard hours expressed as a percentage of hours atlended : i . / Operator P oa 100 = 98%. +. “Rate. applicable Rs. 280 Operator 2 x100 = 78% Rate applicable Rs.2-40 Opciator R og x100 =115% +. Rate applicable Rs. 3-40 i Statement of Gross Pay Operator Hours". Percentage _ Rate Gross Pay > Worked Performance Rs, Rs, P 38 98% 280 106-40 Q 39 78% 240 9360 R a2 115% 340 14280 Problem 5. ‘The following piece rate system is followed in a small concern manufacturing a singl Product : 1) Basic piece rate upto 85% efficiency ; {) 110% of basic piece rate between 85% and 100% efficiency ; ii) 120% ic picce rate above 100% efficiency. ; | : cea to 70% efficiency. Assuming that 100% efficiency is Ne (etter and the pice tei SO pss prise abou cst pee 5 fel ‘tween 605 and 120% efficiency. : Scanned with CamScannerND PRACTICE OF COSTING 2a THEORY Al sono: rleney, tne gunaneed aya apis and is 70x Re 0-0 2 Rs. 35 per day, Upto 70% the basic piece rate applies und is Re. 0°50 per piece, “Above 70% and upto 85% efficiency. Above 85% und upto 100% efficiency the piece piece. rule is high and is 12 x Re.050=Re.0-5$ 54, Above 100% efficiency, the high piece rate is 1B x Re, 050 = Re. 060 per piece. Labour Cost Per Piece at different Efficiency Levels Efficiency (%)] 60 |. 65 Labour cost per piece (Re.) | 0'583'| 0:538 0-50 | 6-50] 0:50}0-50 | 0-55] 0-55 | 0:55] 0-60} 0-60} 060 O69 Note (1) SEIS 2 Re, 0583. (2) AES = Re. 0538. Problem 6. Bharat Garment Corporation produces garments of the same size and style, Employecs are puis wages at Rs, 2:50 per hour for an eight hour shift. They produce five units per hour per emnloyee, The overhead in this department is Rs. 3 per direct labour hour. The employees and the management are considering the following piece rate wage proposal. Upto 45 units per day of 8 hours, $0 paise per unit. From 46 units to 50 units $3 paise per unit. from 51 units to 55 units 5S paise per unit, from 56 units to 60 units $75 paise per unit, Above 60 unite 60 paise per unit. The working hours are restricted to 8 hours per day. Overhead rate does not change ‘sith the increased production, Prepare a statement indicating the advantage to the employee as well 2s tothe management at production levels of 4045, $0.55, 60 and 65 units per worker per shi {1Cy, tte Solution: Calculation of present conversion cost: 7 Rs. Wages per hour 250 Overhead charges per labour hour 3.00 Conversion cost per hour 30 Output per hour Conversion cost per unit Rs. 5:50-+ 5 : Rs. 1-10 Scanned with CamScanner‘ L tAanour 255, 5 Statement show ring Saving to Management piece Rate Piece Wager Overheg ud ol z i pn Poe i“ rah rt Con Fei Con Sa ing oso 2000 4.00 4400 4100 Nil ° 030 22:50 2400 46:50 49:50 3 % s 053 ‘7 4.00 5050 5500 450 8 085 3025 2400 5425 050 625 8 0575 3450 2400 58:50 600 150 8 060 3900 2400 6300 1150 B50 Statement showing Advantage 1o Employee avoticel 40 50 35 o 65 ; Rs, See ees rine wages (per day), 2000 2000 2000 2000 9.09 ee 2000 2650 e00257 450 yay Gains = % TE Tm inp TEA eee ae gttemployersves Re, 3, hie cmployee gains Rs. 250, When daily capat is 50 units, employer saves Rs, 4:50 and employee gure ae 650. As daily output increases father, employees’ gains increase more rapidly thun the employer's savings. This is due to the following reasons: (0) Eating of employce increases due to increase in production and also due to rise in piece rate. 'y from distribution of overhead over larger output, but such “esse in lbour cost resulting from the introduction of piece rate, Problem 7. ee From the following data calculate the total monthly renfuneration of each of the three workers A, B and C= . (i) Standard production per month per worker 19000 units, (i) Actual production during a month: a 850 units, B 720 uni (i) Piece work rate per unit of aetual production 20 pase, fi) Dearness wages Rs.'50 per month (ixed). (x) Mouse rent allowance eR. 20 Pei Cre ance Rs: 20 per month (fixed). : a Nations! production boris atthe ey of Ra for cach Percentage of actual production C960 units. pxceeding 80 per cent of the standard. (CU, B.Com, (Hons.)} a, a Solution : (I) Piece Wages : Rs. A— 850 units @ Re. 0-20 per unit % 5-720, @Re.020. ne C—900 , @Re020. 2 0) Percentage of Actual Production on Standard : A 32 100 = 85% 1,000, + * . a BO 100 = 12% C Mx 100 = 96% Scanned with CamScanner286 THEORY AND PRACTICE OF COSTING (3) Excess Production aver 80% of standard + A 85% — 80% 5% 8 Nil c 36% —- 80% 16% Us) Additional Production Bonus @ Rs. 5 for each percentage of excess production : Rs. A Ru5xS = 25 8 Nil c Rs.5x16 = 80 Statement showing Monthly Remuneration SS eee Rs. Rs. | Re Piece Wages 170 144 | Ig) Additional Production Bonus 2s =~ % Deamess Wages (fixed) od 50 x” House Rent Allowance (fixed) 20 2» » Tiffin Allowance (fixed) 20 20 » Total Monthly Remuneration 285 24 | ae Problem 8. . XYZ Lid. employs its workers fora single shift of 8 hours for 25 days ina month. The company has recently fixed the standard output for a mass production item and introduced un incentive scheme to boost output. Details of wages payable to the workers arc as follows : (i) Basic wages — piece work wages @ Rs. 2 per unit subject toa guaranteed minimum wages of Rs. 60 per day. . e (ii) Dearness allowance at Rs. 40 per day. (iii) Incentive bonus : Standard output per day per worker 40 units Incentive bonus up to 80% efficiency Nil Incentive bonus for efficiency above 80% Rs. $0 for every 1% increase above 80% The details of performance of four workers for the month of April, 2002 is as follows : Worker No. of days worked Ouipuat (units) A 25 ae B 18 500 c 5 910 D ee : 780 Calculate the total earnings of each of the workers. LICWA, Inter, Dec. "98 — Adapted] Scanned with CamScannerce sont ape Wages @ Rs. 2 per un subject 100 guarameed minimum of Rs. 60 per day : wo A 820units @ Rs. 2 me B 1Sdays @ Rs. 60 (guaranteed minimum) (sce Nore] 1080” C. NOunits @ Rs. 2 160 D180 units @ Rs. 2 r Gusrantced minimum applies as the amount o Nate Rs. 2) only. oy Perce of EDtceney a ge 100 = 82% : : 8‘ 800 a POG «100 '= 69m, 910 . co. Pag xt0 = om 780. D Dx x100 = 81% ' (a) Incentive Bonus @ Rs, 50 for each 1% efficiency exceeding 80% of siandard : Rs. A 2xRs.50 190 8 Nil C MxRs.50 550 D IxRs.50 50 Statement showing Total Earnings * Basie Wages Incentive Bonus Deamess Allowance @ Rs. 40 per day Total Earnings : Problem 9. ‘What will be the curning of a worker at Re. 0-55 per hour when he takes 140 hours to do a voluine of work for which the standard time allowed is 200 hours ? The plan of payment of bonus is on a sliding seileas under: wo Within the first 10% of saving in standard time, bonus is 40% of time saved Wihinthe second =. 10% yo we www 50% Within the third NO% vee 0% Within the fourth WOW ew 10% . Focthe rest : 5% www . ° ICWA, Inter.) Solution : a gong Time allowed : . 200 hours” Time taken : 140» Time saved i. 7 hours Exch slab of 10% of: i 0 rs i standard time represents = 795 % 200 = 20 hours Cost Basu - 18 Scanned with CamScanner+ yeorY AND PRACTICE OF COSTING 238 Additional hours for bonus: payment : ; 40% of first 20 hours saved ry Sow ofneXt 20» 0. 60% of next 20 yw a? = Blog Remuneration : ; . h Basie wage for 140 hours @ Re. 055 ne Bonus for 30 hours @ Re. 055 ie Total earnings a : . 29 ‘Note + Some authors make’a different approach to the problem. They calculate the slab no percentage of standard time bu as a percentage of time saved (.€., 10% of 60 hours orn On the basis of this interpretation bonus will be calculated as below ; 7 4 Bonus hourg 40% of first 6 hours saved M4 50% of next 6.F gle 30, 60% of next 6 ete 4 70% of next Cee 42 75% ofbalince 36» 20 a : ae If this interpretation is accepted, it will be observed that every worker will get Wages for (232 x 100) 0F 674 ofthe time saved as bonus, irespective of individual level of efficiency. Breaking the time saved into slabs in such a case is futile and it does not serve =" any purpose. This interpretation cannot, therefore, be logically accepted. Problem 10. i In a manufacturing concern bonus to workers is paid on a slab rate based on savings of cost towards abour and overheads. The following are the slab rates : ") upto 10% saving” 5% of the eaming ii) above 10%and . 15% OH www iii), 1S%and . 20% » Bw ww * ny 20%and 4, 30% MAB ww Vg 30% and, 40% on BH i ww We 40% 2%. The wage rates per hour of 4 workers — A, B, Cand D are respectively Re. 1-00, Rs. 110, Rs. 1-20 and Rs. 1-40. Overhead is recovered on direct wages at the rate of 200%. Standard cos under wages and overhead per unit of production is fixed at Rs. 30. The workers have complcted om unit each in 8,7, 5 and 5 hours respectively. Calculate in respect of each worker: fa) » Amount of bonus éamed ; {b) Total caning: ; ‘ tc) Total eamigs~ av cw, tater] Scanned with CamScannerL !Abour ee potution ! ‘Tune when (hours) (Wage rte pot hour (Rs, ‘ Woges cos (me % re) (Ra, (14 fi) verheuds (200% OF wages) (ap Tat of wae and overhead (Rs, (i ay Standard coxt (RS,) oy Cont savings (RS) (vy) ua) % of savings on standard (4 5 99) (i) $f bonus On cummings : qa) (a) Amount of bonus (Rs, (AE my ‘100 gat) (b) Totul earnings (Rs.) (iit +x) tail) (¢) Total earnings per hour (Rs,) ¢ 4) problom 11. From the following detuils calculate the total eamin A B 800 | 769 100 140 800770 1600 15.40 400 23:10 3000 30.00 600 «699° 20% 23% 13% 2g 104, 162 904 932 M3133 c 550 120. 6-60 1320 1980 3000 1020 . 4% 28% 185 845 134 D 500 140 700 1400 2100 3000 900 30% 21% 147 847 169 ~ time allowed for the job ’ igs of a worker and the effective hourl f Jaour wuges where bonus Is puid under (a) the Halsey cr fom: *Y (50%) scheme : (b) the Ri : Baxi rote of wages per hour ae ‘Time octually tuken Solution : . (a) Under Halsey (50%) Scheme : . Normal Time Wage : 12 hours @ Rs. 360 Donus : $0% of (Time saved x Time rate) Le. 50% of (4 x 3-60) Total Wages Effective Hourly Rate = 43-20 720 Rs. 50-40 12 =Rs.420 Alternatively, “Total Wages = (Time taken + $0% of Time saved) x Time rate ® (12 hours + 50% of 4 hours) x Rs. 360 = (12 hours + 2 hours) x Rs. 360 = 14 hours @ Rs. 3-60 = 50-40 (b) Under Rowan Scheme : Normal Time Wage : 12 hours @ Rs. 360 Bonus ;-_ Time saved Time allowed tev x2 x 360) (Time taken x Time rate) : Total Wages Efcctive Hourly Rote = me = Rs. 450 Scanned with CamScanner260 THEORY AND PRACTICE OF COSTING Alternatively, Bonus as a percentage of Time Rate = Time saved. Time allowed ah x 1002 25% Bonus ='25% of Rs. 3:60 = Re. 0:90 . or : Bonus as a fraction of Time Ral Time sed. Time rate = Time allowed *"™"*"" =i xRs.3:60=Re.090 * Effective hourly rate for time taken = -Ry360+Re.090=Rs. 4:50 Total Wages = 12 hours @ Rs, 450 = Rs. 54 or 12hours @ Rs, 3:60 plus 25% of (12 x Rs. 360) = Rs. 43204 Rs. 1080=Rs.54 Problem 12. . ‘A worker takes 80 hours to do a job for which the time allowed is 100 hours. His duly rug, Rs. 2-50 per hour. Calculate the works cost of the job under the following methods of payment of wages : 5 + (i) Time rate ; fd) Piece rate ; (ii) Halsey plan ; und (iv) Rowan plan. Additional information (i) Material cost Rs. 12 * (il) Factory overhead 125% of wages. © (60, B.Com. ton: Solution: + Calculation of Wages under different methods : (i) Time rate : : Wages for 80 hours (actual time taken) @ Rs. 2-50 Rs, 200 (ii) Piece rate: = ‘Wages for 100 hours (time allowed for the job) @ Rs. 2-50 Rs. 250 (iti) Halsey Plan : : i Normal time wage : 80 hours @ Rs. 2:50 Rs. 200 Bonus : $x (Time saved x Time rate) ive, $x (20%Rs.250) . Sa (is) Rowan Plan: = Normal time wage : 80 hours @ Rs. 2:50 Rs. 200 Bonus : Time: ated (Time taken x Time rate) ‘ en iy (80% Rs, 250), | fee : R20 Scanned with CamScanneracerals iret Wages Prime Cost story Ovethead (125% of direct wages) Works Cost problom 13. Awotker whose basic rate of pay pponus scheme. Besides, he gets a deurness allowance of Rs.2 ‘slculate hi camnings and the effective rate of earning per hour for execriy Sees is 60 puise perhour is working under a $0: 50 Halsey premium ot? allowed. i 4 piece of work in 40 hours as solution : FE : . = Normal time wage : 40 hours @ Re. 0:60 2400 Bonus: $ x (Time saved x Time rate) oe $ x(12xRs.060) - 360 Deamess Allowance : Rs. 2 x40 , Total eamings Effective rate per hour = Rs. 2242 or Re. 094 Problem 14, ‘The standard output of a certain product is fixed (by applying the principles of time and motiow study) at 2,000 units per day of § hours. Calculate the earnings of a worker who produces 2,750 units perday under the Halsey premium bonus scheme (40 per cent to worker). The standard rate per day isRs. 6-40. . : Solution : Standard time for 2,750 units (actual production) : 29 x 8 hours 1 hours 0 Actual time taken for 2,750 units LC Time saved : hoon ‘Time’ wage per hour : Rs. £22 = Re, 080 Rs. Normal day wages ° Bonus: sp * (Tine saved x Time rte) i x@xRe080) * ee tael Total earnings = et Scanned with CamScanneryMEORY AND PRACTICE OF COSTING 262 Problem 15. and 300 pieces respectively of a product :p: prostuced 200, 250 : “ a ‘ A a ce eh ais bali "isd hour and te houny rate of wage payment 5 Soreenee ce wakes te allowing under Hse rem bon 30% ha " hese th aa Cokculate for each oft a ide nes and Rowan premium bonus met (i) Barings for the day (8 hours per day) ; and UICWA, Ini (ii) Effective rate of earnings per labour. A, Iie Solution : , A Pe c 2 300 ion in uni 200 Production in units : 2 Time allowed in hours (200 + 25) 8 (250425) ” (300 +25) a ‘Time taken in hours 8 3 Time saved in hours Nil - 4 Halsey Plan : Rs! s. ad Baie wages BHR 8) G00 (EXREB) GED (BXRSB) gy . il Lx (2xRs.8) 800 4.x(4xRs.8) 1609 Bonus wit t ) 80 5 1609 Eamings for the day oO 72:00 oo Effective rate of ceamings pet hour (Rs. 64-00 = 8) 8:00, (Rs. 720028) 9:00 (Rs, 8000+8) 1000 Rowan Plan > , Basic wagés 64:00 6400 400 Bonus Nil (ExRs. 6400) 1280 (Lx Rs. 6400) 2133 Eamings for the day 6400 7680. By Effective rate of : cae camings perhour (Rs. 6400+ 8) B00 (Rs. 76808) 9-60 (Rs. 85338) 1067 Problem 16. + Wate negotiations are going on ina company with the recognised labour union and the management ‘eqvests YOU as the cost accountant of the company to formulate an incentive wage scheme with a view to increasing productivity, ‘The case of three representatives X,Y und Z— who produce respectively 1,500 units, 1,200 units and 900 units ina normal week of 40 hours is taken up for study. Assuming that day wages would be guaruntced at Rs. S per hour an ths pice rate would be based Ons standard hourly output of 25 units Calculate the camings und labour cost per 100 pieces of each Of the above three workers under (i) Picce-work with guaranteed weekly wage Halsey Premium plan ; and (ii) Rowan premium plan, . Alww calculate the average wage cost for the company to produce 100 pieces under each of the above methods, . IC.U,, B.Com. (Hons.) '95] Scanned with CamScannerSJ wee wun sad oz.0 2H @ SWUM 005 203 sa8em sooid oyN WEY) ALOU FUIDg s14I “OO “SH 40 (OF X +sy) Jo soflem Apyoom pasiuesen’ oy tez@ 4 2 SE mol sod dino repens : 00.0°°8= sag "oma Kano OH) FON F 006 + 002°1 + 0051 sro 001 Geooreeecer econ : : we + 19.81 A= 001% Bore (006 + 002"1 + 006"1 9602 54= 001 * Gogo soo0rE + oOGO Fa (PON <-s2001d opp anf Kunduz 241 s0f 1609 S040 380/9Ky Seer 008 eet) at ‘ost ‘ao ioc 5 wz coor x SE) eT toot * EL RELI (oot * Beg) 12044 01 30d 09 909 wor geez 4 9 -ys9m 2420) Buy TOOL s x mere (oor 8) 999 (one ma x) 008 s 0-00 co-00r ‘00.002 salem eg 3 — at 4 2 Fling mempuaag womoy s2pafy (111) wae oor x QS) tear - (oor x EL) 1991 Coot % 2251) ssseed nt sed 509 nog oooor woos : CaO: asm 0) sus tee x wor (SUX XT OOF isa Xo) x E smog oo-00z ("8 x OF) 00.007 (598 X oF) -on00z (5-54 * 08) sotem 2008, é 5 jd wannaig 62570H HPN Ct) a oo * GE Or (oot * MEL) - 0007 (oor x EL) ssoed opt sad 02 sO 12 290 3281 00-00%. coore [12M s28IC07.0'29 * O01) ODE — IT oNBRHICOT.O "7 X OOS'T) EN LTA Buys OL = ao” oa - 1 og Spp29M pe2mMasDnD syns wonssaid 12pH ) rs 7 a sunod Ut panes aut, o ow” oF feo oF Use EL * x40) Be ist + 007). 0 : (sz+00s) ‘unor ut panojte HLL Ne om foot 0081 ‘rium ut wonseposd Es 2 x ‘ :uonnies: - : i Scanned with CamScanner64 THEORY AND PRACTICE OF COSTING a a oes Problem 17. yp he is workit toying 10 skilled workers. Its considering the introduction of hcnivechme’= ie Hay shen wih 3 bon Rowan stem — tye for increasing the labour productivity to cope with the Increased cernind| for’ ‘ Product by 2s 1. fects that ifthe proposed incentive scheme could bring about ah average 20% increase oye, ih present earings of the workers it could at as suicient incentive for them to produce mor indy, has accordingly given this assurance to the workers. ‘sa result of his assurane, the inerease in productivity has bren observed as revealed by following figures for the current month : : Hourly rate of wages (guaranteed) : Rs.2.00 Average time for producing | piece by one worker atthe previous performance * tee - 2hours (This may be taken as time.allowed) ° Number of working days in thé month . : 25 Number of working hours per day for cach worker 8 Actual production during the month 1.250 units Required : (1) Calculute effective rate of earnings pet hour under Halsey scheme and Rowan scheme. (2) Calculate the savings to Mr Sen in terms of direct labour cost pet piece under tie above schemes. : (3) Advise Mr. Scn about the selection of the scheme to fulfil his assurance. ICA, tater} Solution : Production during the month 1,250 units Time allowed for 1,250 units @ 2 hours per unit (1.250 x 2 hours) 2,500 hours Actual time taken 25 days x 8 hours x 10 workers Bache 2.000. Time saved 500 hours ‘show os pr pice under time rate scheme : 2 hours x Re} Rs, 4 ; Halsey Scheme : ‘i isis Wages of 10 workers: 2.000 hours @ Re, 3 he 0 Bonus S05 x (500 x Rs, 2) Le oa : oe Total wages for 2.000 hourg 4500, Effective hourly rate of camingy B&-4500 Rs.225 se Rs. 2 Labour cost per piece sso =Rs.3.60 Saving in terms of direct a Scanned with CamScannerLABOUR cheme Rewan pasie Wages (0s culculated under Halsey scheme) $00_ onus: “$390 * Rs. 4,000 Toual wages for 2,000 hours lals 8 ive hourly rate of earnings RA 4.200 sffective hourly ; — zo = RS.240, ‘Labour cost per piece P4800 2 Ry 3.94, Saving in terns of direct labour cost per piece (Rs. 4:00 ~ Rs. 384) = Re. 016, From the calculations shown above itis clear tat, saving in labo ' latio x i ur cost under the Hal (Re. 040 per unit) is more than that under the Rowan scheme (Re. 0-16 per unit) The Halsey hone dacs mot, owen ull the assurance of 20% increas averogecamingsf the warken (Le, 20% of Rs.2oF Re. 040 per hour, actual increase being 12-54 only), while the Rowan scheine fulfil this assurance, Hence itis advisable to adopt the Rowan scheme, : Problem 18. . ‘An operator engaged in machining certain components received an ordinary d: ay rate of Rs. 160 per day of 8 hours. The standard output for machining the components has een ted 0 picecs per hour (time as fixed for premium bonus). On a certain day, the oulput of the worker on the machine is 800 pieces. Find the labour cost per 100 picces and the wages that would have been acually earned by the workman under the following: {a) If a bonus of Re. 0:23 is paid Per 100 of the extra output. (0) Mfpaid for on stsaight piece work basis at the standard nite. (c) If Halsey preinium bonus system is being adopted. ~ LICWA, Inter.} - Solution : . : Wage per day of 8 hours Rs. 1-60 Standard output : 80 x 8 640. pieces Actual output i . 800 pieces Ist Method : : Extra output 800-640 : : 160. picces : 2 Rs, Normal day Wages . 22160." Bonus for extra output : 160 pieces @ Re. 023 per 100( #527? x 160) oe 037 Total Wages for 800 pieces ; A Libour cost per 100 picces $22 x Rs. 1-97 = Re. 0-246 2nd Method : A ¢ Standard piece rate per 100 units 5 x Rs. 1'60= Re. 025 ~ ‘Wages for 800 units @ Re. 0-25 per 100 = Rs. 2-00 Labour Cost per 100 pieces (as calculated above) = Re. 0-25 Scanned with CamScannerTHEORY AND PRACTICE OF COSTING poe 266 3rd Method + * -sduton): 32 x1 hour oe Standard time allowed for 800 units (actu production); “gy 9 : ” ‘Actual time taken for 800 units ri Time saved . Time Wage per hour ays =Re. 020 : 1-60 Normal day Wage Bonus: $x (Time saved x Time rate) : “e + x(2xRe.020) om 5 re ‘ : 180 Total wages for 800 picces : Labour Cost per 100 pieces uy x Rs. 1:80= Re. 0-225 Problem 19. oe i ina job for which the standard time is 39 ‘Anemployce working under a bonus scheme saves 4 hours ina job for which : hour. Calculate the rate per hour worked and wages payable forthe time taken under the following altemative schemes (award rate Ré. 1-00 per hour) : : : . (i) Employce receives an increase in the hourly rate based on the percentage thatthe time saved bears tothe time set. ‘ (ii) & bonus of 10 per cent on award rate is payable when standard time (namely, 100 per cent efficiency) is achieved plug a futher bonus Of I per cent on award rate for each I per cent in excess of that 100 per cent efficiency. 7 UICWA, Inter} Solution : Ist Case : Standard time 32. hours ‘Actual time taken (32-4) a Time saved “& hours ‘Award Rate per hour ~ Re. 1-00 Time saved expressed as a percentage of standard time Time saved Time allowed Effective rate per hour worked = Re. 1-00 plus 125% thercof sRs.1-125 Total Wages payable : 28 hours @ Rs. 1-125 = Rs. 31-50 x100= $ x 100= 125% 2ud Case: Stundard time 32 hours = 100% efficiency cs Acwal ime 28 hours, «. % Efficiency = 2 x 100= 114° ARs. Normal time wages :28 hours @ Re. 1-00 ipod Bonus for achieving 100% efficiency : 10% of Rs. 28-00 200 Adgitionat bonus (@ 1% for each 1% in excess of 100% efficieney): 14% of Re. 2800 ee Total Wages payable un Effective Rute per hour worked Bun Be ERs. 1-24 Scanned with CamScannerwT vera Nomal Rate per hour Rs, Jo% Bonus for achieving 100% efficiency 100 4a Additional bonus (@ 1% for each 1% jn ce excess of 100% efficiency) gffective Rate per hour worked : ae Total Wages payable 28 hours @ Rs, 1-24 = Rs. 34-72 im 20. ‘ (a) A:Band Care the members ofa team muking metal brackets Th is6000 bikes per week cach member wedineane emecedoiipttetcim ck and being paid a basic rate You are required to calculate for Weck No. 50: (i) the team's produgtivity index ; i (ii) the effective hourly rate paid to the operatives (iii) the wages rate and efficiency variances of the teain, (b) Name the type of bonus scheme under which the membets ofthe tearh are remunerated and demonstrate your understanding of the charucerstis of that scheme by referring to your answer to (a). : ’ Solution : (a) Standard production of (3 x 40) or 120 labour hours = 6,000 brackets Expected production for (40 + 39 + 38) or 117 actual laboyr hours worked : A 6,000 = 5,850 brackets Production achieved 6,786 brackets Producti index $252 x 100 116 Effective hourly rate of pay : : Rs. 1:75 + 8% (1... 50% of productivity index in excess of 100) = Rs. 1-75 + Re, 0-14 = Rs. 1-89 Standurd cost of 6,000 brackets : 120 hours @ Rs. 1-75 = Rs. 210 Standard cost of 6,786 brackets (actual production) : SS Rs. 210= Rs. 23751 Actual cost: 117 hours @ Rs. 1-89 = Rs. 221-13, Scanned with CamScannerTHEORY AND PRACTICE OF COSTING 268 Wages Variane Rs, {Standard cost ~ Actual cost) is (237°51~ 221-13) . F Wages Rate Variance : : (Standard rate Actual ie) x Actual hours . Rs. {1-75 = 189) x 117 384 Wages EMficiency Variance : : (Standant quantity ~ Actual quantity) x Standard rate per unit ee (5,850 ~ 6.786) x Re. 01035 . 7 ae Check: Wages Variance = Rate Variance + ettcney Variance 16a + For part (a) (ii) ofthe problem students are advised to see the chapter on standard costing ang yariance analysis in ‘Volume Two! of this book. (6) “The bonus scheme under whirh the members of the team are remunerated is ofthe Halsey type and provides fora minimum wage of Rs. 1-75 for each hour worked plus a bonus Of 50% of ie time sived atte normal hourly rate. The efficiency of workers has resultedn a saving Rs. 32°76 ivhich has been shared equally by the workers and the employer.» Problem 21. During the first week of July, 2002, the workman Shri Netaicharan manufactured 300 articles. tle received wages for a guaranteed 48 hour-week at ihe rate of Rs. 4°per hour. The estimated time 19 produce one article is 10 minutes and under incentive scheme the time allowed is increased by 20%, Calculate his gross wages and effective hourly rate according to : (a) Piece work with a guaranteed weekly wage : (b) Rowan premium bonus : and (c) Halsey premium bonus, 50% to workman. a : Solution : Estimated time for | unit t 10 minutes ‘Add : 20% increase under incentive scheme 2. Time allowed nee , 12 minutes Piece rate per unit: G=Tee XRs. 4 = Re, 080 (ic., wages for 12 minutes) Time allowed for producing 300 units : 300 x 22 © hours sa 4. 12 bows (0) Woges under Piece Work with a guaranteed weekly Wage : net Wages for 300 units @ Re. 0:80 per unit (being more than ood fuaranteed wage of Rs. 192 for 48 hours) ; : Bs. 240 Wates for 60 hours (time allowed for Producing 300 units) ie,60%Rs.4 Rs. 240) Breve tpn; Rs, 20 oRs.5 Scanned with CamScannertavour a Woges under Rowan Premium Bonus Pla ) (0) ormal time Wage +48 hours @ Re. 4 per hour Rs Tine saved. ao DonUS : Time allowed x (Thine taken x Time rate) ie, 22 4B x Re 4 Total Wages ' _ Run. srfective rate per hour: M*BOM Re 49, fe), Wogés under Halsey Premium Bonus Plan Normal time wage : 48 hours @ Rs. 4 per hour a fi . ‘00 Bonus: 3 % (Time spd x Time rate) »$ X(I2*RS4) 400 i " Total W: Exetive rate per hour: F216) «Re 450 oe a problem 22. ‘The preduction section of a fuctory working on the job-ordcr system pays their workers under the Rowan premium bonus scheme, Workers also get a dearness allowance of Rs. 12 per week of 48 hours ‘A worker's basic wage is Rs. 2 per day of 8 hours and his time sheet for a week is summarised below: Job No. Time Allbwed ; Time Taken 1001 +25 houre 20 hours 1013 : 30 0 Idle time (waiting) 5 a : : hours Calculate the gross wages he has earned for the weck and indicate the accounts to which the wage amounts will be uebited. IC.U,, B.Com. (Hons.)] * Solution : Time rate: Rs? = Re. 0-25 per hour Bonus; DMESIED. x (Time taken x Time rate) Time allowed : Bonus eared for Job No. 1001 : $x (200-25) = Re. 1-00 Bonus eamed for Job No. 1013: 42 x (20x025)=Rs. 1-67 Gross Waged for the weck to be debited fo : Job No, 1001 Account : Rs. Rs. _ Normal time wage 20 hours @ Re, 0- s 5:00 Bonus ent ag ' 100 Deumess allowance 2 ks. 12 +0 ot v 11.00 Scanned with CamScannerTHEORY AND PRACTICE OF COSTING 27” Job No, 1013 Account: wi . Normal time wage hours @ Re, 025 so | 167 Bonus 7 Dearness allowance Eek. 12 mn \ Ne ae Bhours @ Re. 025 20 4 Dears allowance H xRs.12 20, 44 Gross Wages eared Fr Problem 23, : A worker whose day-work wage is Rs. 250 an hour, received production bonus under the Roy, scheme, He carried out the following work in a 48-hour week : : Job 1 1,$00 items for which a standard time of 4 hours per 1,000 was fixed Job 2 1,800 itenis for. which a standard time of 3 hours per 1,000 was fixed Job 39,000 items for which a standard time of 6 hours per 1,000 was fixed Job 4, 15,000 items for which no standard time was fixed and it was agreed thatthe time would be considered tobe atual time plus 25 percent, Actual time onthe jb ys 4hours. : Job $2,000 items for which a standard time of 8 hours per 1,000 was fixed: each tem wag estimated to be half-finished. Job 2 was curried out on x machine running at 90 per cent efficiency and an extra allowance of ty of standard tigre was given to compensate the worker. 4 hours were lost due to power-cut. Calculate the earnings ofthe worker, clearly stating your assumptions forthe treatment giveny you forthe hours lost duc to power-cul, —- LUCHA, tater} Solution : Time allowed forthe jobs : Job 1 1,500 items at 4 Kours per 1,000 6 hows Job 2 1,800 items at 3 hours per 1,000 $40 2 Add: $ extra allowance + 060 oe Job 39,000 items at 6 hours per 1,000 4. Job 4 15,000 items (actual time i.e. 4 hours + 254%) oe Fe $2,000 half-finished items or 1,000 items on the . basis of 100% completion at 8 hours per 1,000. a. 3 : 79- bours ‘Actual time taken (48 hours ~ 4 fost hours) : tel Time saved BS hows Earnings of the worker : : ~~ Rs Normal time wage : 48 hours @ Rs. 2:50 per hour 12000 ; Time saved. = Bonus : “Fime allowed * (Actual time taken x Time rate) F x44 Rs.250 4673 16873 Scanned with CamScanner: "Labour m ai spe wonter will et normal wages for 48 hours including the hours Tost due to power-cut, because te iste hours ure beyond his control. White calculating the amount of his bonus, however, the jaf time taken should be considered (ie., excluding the idle hours) on the assumption that the ra fost due 10 power-cut is abnormal ide time. problem 24. the following particulars you are required to work out the earnings of a worker for a week (a) Straight picce-rate, (b) Differential picce-rate, (c) Halsey premium bonus, scheme (50% very and (d) Rowan premium bonus scheme : shee : Weekly working hours nea . Howry wane re Rs. 750 time taken per ploce 20 minutes Normal output pet week 120 pieces ‘Actual output for the week 150 pieces pifferenial piece-rate 80% of piece-rate when output is below normal and 120% of piece-rate when output is at or above normal, : HICWA, Inter] solution : (a) Under Straight Plece-rat Piece-rate = —Weekly time wages ~ "Normal output per week “sx Rs. 750 _ tag RE / Wages for 150 pieces @ Rs. 3 's. 450.» Alternative calculation : Normal time for 150-pieces @ 120 pieces per week : 433 x 48 hours = 60 hours ‘Wages for 60 hours @ Rs. 7-50 per hour = Rs. 450, (6). Under Differential Piece-rate Differential piece-rate applicable to the worker: 4B Rs. 3.00=Rs, 3:60 per piece Wages for 150 pieces @ Rs. 3-60 per piece = Rs. $40. (ch) Under Halsey heme: | Time allowed for producing 150 picoes on the basis of 20 mines per piece + 150 x 20 ao Premiun Bonus Scheme : = 50 hours. : Productive working hours in a week (j.¢., normal time taken to produce normal ‘output of 120 pieces per weck) 120220 i i {The balance (48 ~ 40) oF 8 hours per week represents normal ide time} ‘Time saved : (50 hours ~ 40 hours) = 10 hours. = 40 hours. Scanned with CamScannerTHEORY AND PRACTICE OF COSTING ee ‘i 1 Rs, Normal time wage : 48 hours @ Rs, 7:50 oy Bonus: $0% of (Time saved x Time rate) dea fx (ORS. 750) ats i Bas 4). Rowan Preiniwn Bonus Scheme : ic Nonmal time wage : 48 hours @ Rs, 7:50 se - Hot + TUMEAINGL 5 (Time taken (see Note) x Time rate] : Bons; THREES: (Time ken ‘ 7 ie, 2 x (40x Rs. 750) ° a 42005 Note + Though the gross time taken to complete the work was 48 hours, bonus has| been alevlatedon the basis of productive working hours, Problem 25, * Re: Group bonus system One foreman, one operator, one labourer snd one boy undertake to manufucture 150 anicles on Piece work basis for Rs. 660. Each of the above spends 100 ordinary hours on the work and their wage rates are as follows : Foreman und operator Rs. 2 per hour each, labourer Re. | per hour und the boy 50 uise per hour, Find out the amount of the piece work premium and show the amount which each worker will receive by way of premium when its divided in proportion to the wages paid and show in each ease the-percentage the premium bears to the wage payments at the ordinary rates. Solutlon: = Time Wages of the group : Bs. | Foreman @ Rs.2 per hour for 100 hours 200 VOpertor@Rs.2 100 200 Labourer @ Re. 1 ~~ 100. , 100 IBoy. - @Re.050 . 100. : - Total Time Wages 3 S50 Picce Work Wages 660 Piece Work Premium To This premium will be divided ithe ratio "200: 200: 100: S00r4:4:2:1 ‘The Foreman will receive ‘The Operator wil receive ‘The Labourer will reecive of time wages of the members of the group, A x Rs. 10= s. 40 oF 20% of his wages, TE RS. 10=Rs. 40 07 20% of his wages. Fr XR. 1O=Rs. 20.07 20% of his wages, 1 The Roy will receive Rs. [10% Rs. 10 of 20% of his wages. Scanned with CamScanner: “mM ARs. 300 Pa C Rs.600 BRs.4:50 D Rs.600 Me of each workman taking into ¢ Ny Fahowance of RS, $0°00 per week, (CU, B.Com. (Hons.)) ns . rise eamings ofthe BrOUP : RS, 6-00 x (30 «Rs, 900 wages of the workers for the time of Broup works : Time rate x Hours Spent A: RS. 300% 40= Rs, 120 B: Rs. 4:50 x 40 = Rs, 180 C : Rs.6:00x30=Rs, 180 * : D : Rs. 6:00 x20=Rs. 120 spate ttal piece earings of the gro P (Rs. 900) will be shared by them in the ratio of 18: 12or2:3:3:2 : mt Statement Showing Weekly Earnings A a] cl o ‘ " 7 Rs [Rs [Rs | Rs svi time wages : iene A: (44-40) of 4 hours @ Rs. 300 R =| -jo- B:(H-40) or 4 @ Rs 450 - 1D moh ass (4-30) or 4, @ Rs. 600 a - al — D:(H-20) or 4, @ Rs 600 = — | =—| us Geom piece wages ~ Rs, 900 in the ratio of 12:18: 18: 120r2:3:3:2 - 180 270. 270 180. Daaness allowance : 50 so | sol 0 Taal weekly earnings 242 | 338 | 40s] 37a —T—SS Problem 27. ‘ezunit, 10men work as a group. When the production ofthe group exceeds the stadard output of 2Wpiees per hour, euch man is paid an incentive for he excess production in addition to his wages ‘thourly rate, The incentive is at half the percentage, the excess production over standard bears to tie sandaud production, Each man is psid an incentive atthe rate of this percentage of a Wage rate «ARs. 2 per hour, There is no relation between the individual workman's hourly rate and the bonus. fe, : Sraweek the hours worked are 500 hours and the toal production is 1,20,000 pieces, '9) Compue the total amount of bonus forthe week. 19 Calculate the total earnings of two workers A and B ofthe group : worked 4 hours and his base rate per hour was Rs, 2°29 Bworked 48 hours and his basic rate per hour was Rs. 1:90 UICWA, Inter] Spst Basu 19 Scanned with CamScannerTHEORY AND PRACTICE OF COSTING Torol amount of bonus forthe week: (a) / 1209 ‘Actual préduction : ‘Standard production in 500 hours @ 200 : Pg picces per hour 200 ' Excess production over standard - 20,000, Vay 1 20,000 . = = Incentive percentage : 3 7 99 909 x100= 7 x 20% = 10% : incenti : 2=Re.020 : Hourly rate of incentive payment : 10% of Rs. i ‘Total amount of bonus for the week for $00 hours @ Re, 0-20% Rs. 100-00 (b) Total earnings : Worker A — . * % Basic earnings for 44 hours @ Rs. 2-20 5644 Incentive for 44 hours @ Re. 0-20. t : ta Total a Worker B— Basic camnings for 48 hours @ Rs. 1:90 129 Incentive for 48 hours @ Re. 0-20 ‘és 36 : sa Total : ims Problem 28. : = A company manufactures thre Products D, E and F. It has thiny employees who are paid undera roup bonus scheme. There are thre grades of employees who ar paid a bonus the excess of ine allowed over time taken.:The bonus is Paid on the employce's basic rate less Re. 0-75 and is shared ‘mong the direct workers in proportion tothe time spent to the work. The production detail forte Period in question were as follows : : Piet > Units produced : 80 ie a Time allowed per unit (in minutes) 6 i 1a, _Grade of employee R T Number of direct employees 10 7 6 Basic rate (Rs.) 200 imo 185 Hours worked by each employee is 3 From the above informa taken, (6) the total bon tion You are required to calculate (a) the: percentage of hours saved to hous us Payable tothe group of direct emplayees, und (c) the total ‘wages payable Scanned with CamScannerie cot e owed er Units Produces t% " net Ime. a ae wnt Total Time Allowed » s- thoursy 4 or 120 e 5 300 100 0 r i “ ” et worked m4 co NO. of Employees Hours Worked Total Hours Cpl 10 er Employee Worked : 4 " 150 : 16 a 28 T 3 400 we 1 percentage of hours saved fo hours taken to 0 ours allowed a Hoon worked . a Hours saved : = «Hours saved my i = PETES? Foes waked.“ V0 gn % 1D =335% (oy Bons Payable = Grade of Hours Worked Bonus 35% Rate (= Basic Bonus Employee (hours) Rate - Re. 0-75) Rs. Rs. R 150. 50 125 62:50 s 128 a3 1.05 4480 T 400 1334 110 14667 ee 1335 £8. 226 {c) Toil Wages Payable : > Grade of Employee Hours Worked Base Rate Wages Bonus. —Total Rs. Rs, Rs. Rs. R 150+ 200300006250 (36250 5 128 180 230404480. 27520 T 400 185 _ 7400014667 _88667 we 177040 25397 152437 Problem 29, . 4 group incentive scheme has recently been introduced in a factory-with the following salient features: + (0) The scheme is applicable to both direct und indirect lubout. 7 25 days) 8) For any production in excess ofthe standard rot fixed at 10.000 tonnes pet month iS ra = : 4 general incentive of Rs. 10 per tonne is paid in aggregate, The total amount payable Scanned with CamScanner. THEORY AND PRACAIEE So assumed percentage of such excess product don the basis 0 c separate group is it namely ye by direct labour, @ 10% by inspection stall, @ 12% by being contribu namely. sctand @ 8% by supervisory staff. maintenance staf and @ 9% by NP® auction is more than 20% above the standard, direct Sata: 5 per ton for all production in excess of 120% of m1 7 In addition to the above, labour also gets a special standard. , wit «d) Inspection stat are penalised @ Rs. 20 perton forany rejection by customer excess of lot nspecti actual production. fe) Maintenance staff are also pens lars for a raonth, work out (c alised @ Rs. 20 per hour of machine breakdown. From the following partic the production bonus carned by cach group : som the following P: (i)* Actual working period 20 days : (ii) Production 11,000 tons ; (i (iv) Machine breakdown 40 hours. Rejection by customer 200 tons : Solution : Excess production : ots Aciual production aise Standard production m0 Excess production over standard 3.000 20% of standard production : 1,600 Excess production above 120% of standard 7 1,400 General incentive + 3,000 tons @ Rs. 10 perton = Rs. 30,000. Special incentive : 1,400 tons @ Rs. Sperton= Rs. °7,000. * Penalty : Inspection staff (200 ~ 1% of 11,000) or 90 tons @-Rs. 20 = Rs. 1,800. s Maintenance staff 40 hours @ Rs. 20 Rs. 800. Statement of Bonus Earned . Rs. Direct Labour : ‘Share Of genieral incentive : 70% of Rs. 30,000 ‘Special incentive - cae 28,000 Inspection Staff: _ Share of gencral incentive :-10% of Rs. 30 palin ive: 8. 30,000 Maintenance Staff : - Share of general incentive: : Lean pees incentive: 12% of Rs. 33.000. Supervisory Staff : ‘ ve Share of general incentive : 89% of Rs. 30,000 Scanned with CamScannerLABOUR ° : _m propio 3 _ -pe standard presetion in 8 Company is 20 units per hour. For the frst weck of April, a worker's + THE wa 28 FHIOWS " Monday ve win a Tuesday Hi ; Wednesday ome :* Thursday "3 = Friday 10 bs, You are required 10 draw up a schedule showing the worker's dily earings, the effective rourly the company uses : ‘ page of eaiming and the labour cost per unit, fa) Habey premium plan with a guaranteed rat of Rs 50 per hour anda premium of 60% ofthe time saved on production in excess of standard, or \ifferential piece-rate system with rates of 20 pais per unit below standard, 24 paise (by Thetaylord ; “ jandard und upto 20% above siandard, and 30 paise per unit for all production when perunit at st daily output exceeds 20% of the standard. Solution = ~ (a) Halsey Premium Plan 1 7 8 9 Dass Time | Time Effective | Labour [Allowed] Saved Hourly Rate| Cosutunit (col. |(col.3-8) (col. $+| (Gol. 728) | (601. 7= 2220) col. 6) col. 2) (onitsy | Hours Rs, Rs. Rs. Monday 140 +50 026 T 450 |. 023 re ra 475 02 Tee | i aes | 022 a = 518 o2 Fay 200 (0) Taylor Differential Piece-rate System : Standard production per day : 8 x 20 = 160 units. 20% of standard production : 20% of 160 = 32 units. Picce-rates applicuble + : is it For production less than 160 units » paise per unit For production between 160 and 192 units os “ For production above 192 units ee mee 2 a Pi i 7 Labour ors Production | Piece-rate- | Total Earnings oe i | cosh ro Rs. Rs. 7 (units) Rs. Re =. +0 Testy “10 fe 30 | (O24 Wedned 160 024 aS 024 195 oz 024 Fey i | 030 200 Scanned with CamScannerTHEORY AND PRACTICE OF COSTING mone ee ————__ Problem 31. Sa). Bonus paid under the Hi When will this statement () The time al hour showing the bonus eared, total earings worker) and Rowan system of premiuin bo! your comments on the comparati Solution : i Time saved x Time rate (a) Bonus under Halsey Scheme Time saved Time taken x _ Bonus under Rowan Scheme : Bonus under both the schemes Time saved. Time taken x Time i 1 = } % Time saved x Time rate = = or, t= —Timetsken * 2 = Timealiowed or. Time taken = } x Time allowed. Hence bonus under both the schemes will be equal when time tal allowed. (b) Comparative Statement of Wages Time | Time Allowed | Taken Hours | Hours | Hours| 2 2 12 12 12 12 be equal when the following conditior. «lds good : Total Eamings - alsey (50%) scheme equals the bonus paid under the Rowai scheme, "hold good ? Give proof in support of your answer, lowed for a job is 12 hours. The hourly labour rate is Rs. 2. Prepare a statimeny, and hourly earnings under Halsey system (50% xg nus for every two hours saved progressively. Give findings inthe tivo systems. Time rate rate ken is} (i.e, 50%) of the time Earnings/hour The following observations could be drawn from the ‘comparative statemesit prepared ubove: (1). Under Halsey system bonus increases steadily with the increase i system, on the other hund, bonus increases upto acertain level the allotted time is saved) and then it begins to decline, (2) When the time saved is less than 50% of the standard time, a Rowan system than under Hulsey system. A worker wi efficiency. Under Rows where 50% of of efficiency (i. worker cams more wage undef ho saves more than 50% of the standard time will eam more wages under Hulsey system than under Rowan system. It2Y be noted that, in Rowan system a less efficient worker’ may get the same bonus 35 2 effin one gets. For example, a worker who can complcte the job in 10 hours gets the 537° nus, i¢., Rs. 3:33 which a better worker ‘gcts completing the job in only 2 hours. The Rowan system, therefore, provides a safeguard ugainst a loose fixation of standards. : Scanned with CamScannerworker con double his earnings per hou 0 val vem Vanditem $ of column 9), Under Rowan system car satan be doubled. / / quay of work under Hulsey syste may deteriorate resulting from overspeed in work ‘yith a view to curing more bonus. Under Rowan system, overspecding is urrested, becuse there ison automatic check on the earnings. : hen the time saved is half of the standard time, bonud under both the systems is the same, This ©) «again, the level of efficiency where ponus.wnder Rowan system is the maximum. rom the above observations it may be concluded that the Rowan system is better than the Halsey ayer, provided there i no Toose Fixation of standard. Problem 32. . era certain work order the standard time is 20 hours, Wage Rs. $ per hour, the actual time taken is Ft ours and factory overhead charges are 80% of direct wages for standard time. et out 2 comparative statement showing the effect of paying wages on (i) the Halsey, and {iiy the Rowan incentive bonus systems. {C.U., M.Com.] @ Solution : Standard time 20. fours ‘Actual time taken 13s Time saved “7 hours Normal time wages: I3hours @ Rs.5 Bonus under the Halsey System : F 4 x (Time saved x Time rate) i 4 x(7xRs.5) Bonus under the Rowan System : Time saved ry 7 : Standard ume (Time taken x Time rate) vies XC3XRS.5), : Rs. 22-75 Employer's Savings under the Halsey Plan : Be - Saving of Labour Cost — 7 Rs. Rs, Standard Wages * 20 hours @ Rs. 5 100-00 ‘Actual Wages Rs. (65:00 +17:50) 8250 : : : 17:50 Saving of Overhead 80% of Rs. (100 - 65) 28:00 : : Total 45:50 + Employer's Savings under the Rowan Plan : _Saving of Labour Cost — ie : Standard Wages 20 hours @ Rs. 5 ions ee : ‘ages Rs, (65:00 +22-75) 87.75 pa es ca . aa 1225 ng of Overhead 80% of Rs. (100 ~ 65) 28:00 Total ap2s Scanned with CamScannerTHEORY AND PRACTICE OF COSTING 280 ‘Statement showing the effect of Paying Wages CN eee der Halsey and Rowan Plans under Effective Ratefhour! Total Earnings Normal Wages Rs. incentive, System : = Total earings Note: (1) Effective rate per hour = oe Problem 33, Ina bonus system, bonus hours are credited to the employce in the proportion of time taken wticy time saved bears to time allowed. Jobs arg carried forward from one weck to another. No overtimeis worked and payment i made in full for all units workgd on, including those subsequently rejected From the following information you are required to calculate for each employee : ; (a)_ the bonus hours and the amount of bonus earned ; (b) the total wage costs :(¢) the wage costof cach good unit produced. Employee A B c Basic wage rate per hour Re. 0:50 Re. 0-80 Re.075 __ Units issued for production . 2,500 2,200 3,600 Time allowed for 100 units * Zhours 36 minutes 3 hours V hour 30 minutes Time taken . S2hours * 7Shours 48 hours Rejects : 100 units 40 units 400 units 7 LUCWA, Eng. — Adapted] * Solution: Employee A : B c Time allowed ° (2 hours 36 minutes x25) 65 hours (3 hours x 22) 66 hours (1 hour 30 minutes x 36) $4 hours Time taken Le I . a. Time saved 13 hours Te tows (a) Bonus eamed ms . =: 0 (G *52xRe.050) Rs. $20 — Fx 48x Re.075) Rs 400 Basic wages : ; (52% Re.050) Rs. 2600 (75 x Re. 080) Rs. 6200 (48 x Re. 075) Rs 3600 (b) Total wages cost Rs. 3120 Rs. 60:00 Rs. 4000 Good units produced ny (2,500 - 100) i 3,200 (e) Wages cost per unit of BBO 40y = £g00d output - ; 25 Re. 00278 Re, 001: Rs:00 pata Problem 34, Jobs are issued to operator X, to make 189 units, and tw operator ¥, to make 204 units, for which? pieeraee of 20 standard ‘minutes and 15 standard’minutes per unit respectively. is ced eapines m, ret bonus is paid at $0% of the basic rate, which is Rs. 4 pet hour for Gretta UNE Working week is 42 hours. Hours worked in excess are pald at time foe Scanned with CamScannerLaABoUI . 281 45 hours and ¥ completes A efective material six OF X's units and four of vit produced are paid for, You are required to caleulate for each of X and Y: {a) the amount of bonus payable ; ” {p)- the total pross wage payable ; . is units in 39 hours (but works a full week) ). Due ‘Sunits are subsequently scrapped, although all fo) the wages cost per good unit made, ; IICWA, Eng. — Adapted] solution = . 5 2 y Time allowed 189% 22 63hours’ 204% #8 it @ xe Si hours Time taken Sw 39 Time saved “TS hours ‘Whours (a) Bonus payable IB xy XRs.4 Rs 36 12KE xR Rs 2A Basic pay for the week 42xRs.4 Rs. 168, 42xRs.4 Rs. 168! Overtime BxIdeR4 RE 16 : Nil Bonus a. ie Rs. 36 Rs. 247 (b) Gross Wage payable Rs. 220 Rs,_192 Good units produced 189-6 183 204-4 200 - Wage Cost per good unit Rs. 220 Rs. (192-12) 183 200 = Rs.1-202 approx.) = Re.090 Note : (1) Jthas been assumed that 3 hours @ Rs. 4 were booked to day rate work. Hence Y's basic pay has been taken as 42 x Rs. 4 instead of 39 x Rs. 4. : Problem 35, . ; ‘The existing incentive system of a certain factory is = ; Normal working week — , 5 days of Y-hours plus 3 late shifts of 3 hours each + Rate of payment — - Day work Re. 1-00 per hour Late shift Rs. 1:50 per Hour Additional bonus payable — Rs. 2:50 per day shift Rs. 1-50 per late shift Average output per operutive | ~ for $4-hour week ic., including 3 late shifts — : 120 articles . = . |i order to increase output and eliminate overtime it was decided to switch on to a system of Payment by results, The following information is obtained : Time rate (as usual) Re. 1 perhour. Basic time allowed for 15 articles 5. hours ‘ Piece-work rate add 20% to picce " Premium , add 50% totime Scanned with CamScannerm THEORY AND PRACTICE OF COSTING ‘You are required to show : (1) hours worked : (ii) wecty euler nae article f under the following systems : Pea ie ta) Exiting tine rate ; (b) Straight piece work : (c) Rowan system : (d) Noe ae ‘Assume that 135 articles are produced in a 45-hour weck under OS oer teers rte cams half the time saved under the Halsey system. The additions iii) number of articles produced ; and (iv) labour cost per . + [ICWA, h will be discontinued in the proposed incentive scheme. ‘A, tater.) Solution : “ss te MenWiee ue Sx9or 4Shours @Re. Uperhour | . 4500 Overtime Wages: 3x3or hours @ Rs.” 1-50 per hour B50 Day Shift Bonus: S days @ Rs. 2:50 perday . 1250 Late Shift Bonus: 3 shifts @ Rs. 1-50 per shift 450 Total Weekly Eamings 50 (b). Straight Piece Rate : . ‘Time Allowed for producing 15 articles = 5 hours- Time Allowed for producing 135 anicles % x 135 = 45 hours Rs, Normal Wages for 45 hours @ Re. | per hour 4500 Add : 20% . 900 Total Weekly Earnings sO (c) Rosan System : aoe Time Allowed for 135 anicles (as calculated above) 45° hours ‘Adal: 50% Time Aliowed under premium plan ‘Actual Time taken Time Saved , Normal Time Wages : 45 hours @ Re, per hour 4500 3 1 per hi Bonus ; —Wmesaved, : Tine alowed * (Titme taken x Time rate) i BR xrs.as 1500 (d) Halsey Spstem : Total Weekly Eamings oe Nonmal Time Wage: 45 hours @ Re, 4 rat Rs. Bonus : 5 x (Time saved x Time Fate) ae : “nas Statement. showing information 5538 Method ‘Number of Anictes Produced (a) Existing Time Rute (6) Straight Piece Rute (c) Rowan System (d)_ Halsey System’ Scanned with CamScannerby 73 prom 3 te pat er in Kee Pee Lid, is paid a guaranteed wage rate of Rs, 30 per hour, The stand annie! wt Tor » particular product is 4 hours, Ramkumar, « worker, is puid wages under the Vive scheme and be has earned un effective hourly rute of Rs, 37°50 on the manufseture sg have been his total carnings and effective hourly rate, had he been put on the Halsey wou What scheme (50%) ? ICA., Inter. Nov. '99 J jncentive sel gotutlon = erective hourly rate under Rowan scheme {Guaranteed hourly rate Increase in hourly rate * 100 = 25% percentage increase in hourly rate: the hourly rate i increased by 25% due to payment under the Rowan incentive scheme, time a js oqual to 25% of the standard time, Accordingly, time saved is { hour (i... 25% of 4 hours) fad time taken is 3 hours, ; Wages under Halsey Scheme : . Rs. Normal Time Wages : 3 hours @ Rs. 30 per hour 90-00 onus: 2 x Time saved'x Time rate) i.e. 7p % (Ux RS. 30) 15-00 Total Wages Earnings 105-00 Effective hourly rate : Bas = Rs. 35 Problem 37. f The standard time for ajob is 60 hours. The hourly rate of guaranteed wages is Re, 0-75. Because of the saving in ime, worker A gets an hourly wage of Re. 0:90 under Rowan premnium bonus system. Forthe same saving in time, calculate the hourly rate of wages that worker B will get under Halsey- Weir premium bonus system (assuming 40 per cent to worker). LICWA, tnter. Solution : Effective hourly rate of A under Rowan scheme Re. 090, i . Re._0-75 Guarattced hourly rate Increase in hourly rate . Re, O15 Percentage increase in hourly rate : Betts x 100 = 20%, Since the hourly rate of A is increased by 20% duc to payment under the Rowan preinium bonus scheme. ime saved is equal to 20% of ghe standard time. Accordingly. time saved comes 9 Whours (ie., 20% of 60 hours) and time taken is 48 hours (i.e., 60 hoyrs ~ 12 hours), a of 2 for the same saving in time under, the Halsey-Weir systein may be alti | as . S. Ne . ‘ormal Tinie Wages : 48 hours @ Re. 0-75 per hour 36:00 Bs . onus: §D Time saved x Time rate) ic jp X (12% Re. 075) = Total Eamings < 5 Elective hourty rate = B39 ~ Re, 0-825 we . Scanned with CamScanner1 AND PRACTICE OF COSTING 284 THEOR is inuse at Location A and Halse Kamael factories ut two locations, Rowan plan is apenrie nents Asien oadadl ic rate of wagesare sume for job simian lecation B. Standard time aa a can A ncompleedin ma isco ‘ i 1.224 Testor thes shavsConeoncossateresective passa Re, L224ang 8 Location B, ; Overheads account for Rs. 20 per hour. You are required to: (i) Find out the normal wage rate ; and [ICWA, Inter, June (ii) Compare the respective conversion costs. l dune 99, Solution : (i) Lethe normal wage rate be.x per hour. Taking Location A or B as the basis, normal wage; me ‘san be determined as under : Location A a ae i m Time allowed 60 hours a + Time taken + Tr how : 7 Time saved 24 hours ohne Time Wages » 3x Ate Time saved imme we t saved & Tit Bonus Time allowed ~ Time wages 2* eo ea =} xirxxs 6 Total Wages 48x + Gx = 54x Overhead ‘3hours @ Rs. 20 = Rs. 720 48 hours @ Rs. 20 =Rs.960 Now, 3 . : 50-4r-4Rs.720= Rs. 1,224 S4x + Rs, 960 = 1,500 3 otal conversion cost) (total conversion cos!) Solving the equation we get, 7 =Rs. 10 x=Rs. 10 Hence normal wage rat is Rs. 10 per hour, s 7 ti) ‘Statement of Comparative Conversion Costs. 2 Location A Location B 5 Rs, Rs. Basic Wages 36xRs. 10 360- 48x Rs, 10 480 Bonus 2 é , te *RS360 144 PRI2xR. 10 Overhead n0 2 90 5 1234 1,300 Problem 38, aan Job is 40 houn, The raw material input cost ana “rly wage rate are same f dip isenttled toreceive bonus according tot Fee forth the worker Pap ei ise iin While Arindamis paid bonus oe per Rowan plan, Wot overheads are recovered on the : was comes to RS. 5,200 irrespective of she ‘eae, ne tow worked. The factory cost oft Find out hourly woge rate and cost of 4," mises inp Scanned with CamScannertAnour 2a ‘si During the some period, the fuctory received a job order the details of which are given below paw material cost Rs.5000 + Standard labour time 200 hours ‘Actual time (Job done by Arindam) 190 hours ‘Administration overhead 15% of works cou Selling and distribution overhead 10% of total cont Profit margin ; 20% on sules What price do you recommend for the job? . (CU, B.Com. (Hlons.) Ot — Adapted} Solution : (a) Calculation of Hourly Wage Rute and Cost of Raw Materials input : Pradip Arindam + Time allowed 40 hours 40 hours Time taken . Bae WD, Time saved “Bhours * TO hours Works Overheads : ae for Pradip 32 hours @ Rs. 15 = Rs. 480 for Arindam = 30, @ Rs. 15 = Rs. 450 Prime cost : (Factory cost - Works overhead) for Pradip» Rs. $,200— Rs. 480 = Rs. 4,20 for Arindam ‘Rs. 5,200-Rs. 450 = Rs. 4,750 Letthe normal rate of wages be X per hour : Bonus : for Pradip (Halsey plan) $ «Bes Se 5 for Arindam (Rowan plan) : 43 x30 = 75x Total Wages : for Pradip 32c+4x = 3x sfor Arindam + 30x4 75x = 75x Now, . | m+36r = Rs.4,720 i | m+37Sx = Rs. 4,750 2 - | Subtracting (i) from (ii) we get, | 'Se= Rs. 30 or, = Rs, 20 ( t Hence, wage rate per hour is Rs, 20, | : ¥ 24 | Material cost + (Prime cost ~ Total wages) ‘ t Rs, 4,720 - (Rs, 20% 36) Re Laka ie Rs, 4,750 ~ (Rs. 20 x 37:5) = Rs. 4,000" ayes Scanned with CamScannerTHEORY AND PRACTICE OF COSTING 286 ic ir the Job (b) Calculation of Price 10 be Recommended fo - . at Material Ara pepo Basic Wages : 150 Rs. 20 me Bonus : 2; x Rs. 3,000 a8 Prime Cost . un Works Overhead : 150 x Rs. 15 a Works Cost ; vi ‘Administration overhad : 15% of Works Cost . . is Cost of Production ae / 1260 Selling and Distribution Overhead : - 10% of Total Coste. 42 x Rs. 12.650 1406 : : : 14,056 Total cost 6 Profit: 20% on Sales ie. 25 Rs. 14,056 : 3514 Recommended Price Ti Problem 40.. . Following are the particulars for Jusie, 2002, relating to four employces working in Department D of 1 factory. exclusively for Job No. $10: Name Designation Wages Rs. 5 P Foreman 800 per month Q Mechanic 15 perday ° R Machine operator 2 per day 5 Workman 10 per day ‘The normal working hours per week of six days are 48, at 8 hours per day. Sundays are paid holidays. (There were no other holidays during the month.) Provident fund contribution was 8% of monthly wages by both employer and employce. Employees’ State Insurance contribution was 3% of monthly wages by employee and 5% of monthly wages by employer. B From the foregoing data, culculate : a net wages payable by the employer fr the month ‘otal améunt of provident fund contribution to be deposit ul posited by employer ; tc) toll amount of ES contrbutionto be deposited by employer a ) total labour cost t0 the employer for the ‘month of June, churgeaple to the job; te) sa 0st of Job No, $10 requiring material valued at Rs. 6,000 and overheads ut $0% of prime Solution : ; 4 (4) Net Wages payable for the month Of June, 2002 : ; Rs. P For : theca ~ 9 B20 per mons 3s 000 R (Machine @ Rs. 1S per duy for 30 days- 430) S(Workmant s Re. 12 per duy.for 30 ys 3000 Gross Wages payuble Peller ay for 50 dayt anes : olf e Scanned with CamScanner. Rs. e . ot : 1.91000 Less Employces’ contribution to: « PF @8%ofRs.1,910 jaaieo ESL @3%ofRs. 1,910 144 a6 Net Wages payable aaa iy Recordin 10 be deposited by employer: Employees’ contribution @ 8% ; ion Employer's contribution @ 8% ° oe i340 . : , 305-60 (a) ES k-conributon to be deposied by employer : = Employees’ contribution @ 3% : 130 Employer's contribution @ 5% ; ‘00 feats 15280 (a Tool Labour Cost to the employer: 91000 Gross Wages payable Employer's contribution to Employer's contribution to E. S. I. 2,158:30 (e) Total Cost of Job No. 510: , , Material ‘ 6,000.00 Labour a 2,158:30 Prime Cost . 8.15830 Overhead at 50% of Prime Cost ; 4079-15 : : 12,237-45 Problem 41. i From the particulars given below, calculate the labour cost per man-day of 8 hours: Rs. 2 per day. : 25 paise per every point over 100 cost of Tiving index for working cluss — current cost of living index 700 points. (0) Basic salary (0) Dearness allowance (0) Leave satary “i 10% of (a) and (b) (4) Employer's contribution to te . mete nd 8% of(a),(b) and(c) > Einployer's contribution (0 : ; F = Insurance +. 25% of (a), (6) and (c) eanlone on amenities to & i 4 Rs. 20 per head per. mensem, (8) Nuy . inber of oa ing days ina month 25 days of Bhourseach: cwa, Inter Scanned with CamScanner= Statement 2 "Rs, 200 (a) Basic Salary tt Pe 600 x 0:25 * 35 c € a exes ain 10% of (a) and (b) 086 c) a ; “ (d) Employer's contribution (0 Provident Fund : ts 8% of (a), (b) and (c) — to State Insurance + oh (e) Employer's contribution 25% of (a), (b) an (C) (N. Expenditure on amenities Labour Cost per man-day Rs.20% 4 Problem 42. . ‘cid Calculate the standard labour hour rate for a workman of Grade IIf from the following data ; Basi¢ pay B . Rs. 200 p.m. 4 D.A. Rs. 150 p.m. . Fringe benefits” Rs. 100 p.m. urs each) : Number of working days per year — 300 (of 8 hot Leave rules: 30 days privilege leave with full pay ~ 20 days sick leave with half pay availed of. What would be the labour cost per hour ifn Usually privilege leave and sick leave are sick leave is availed of during the year. LICWA, tnter] Solution : . : Monthly: Amual es Rs. asic pay (Fringe benefits . 3 100 450 Less : Sick leave availed of (20 days): + x 20% Rs. 450 ° 30 / ; Annual Labour cost Effective Working hours : (300 ~ 30 - 20) or 250 days of 8 hours each = 2,000 hours. iad = Rs. 5.250 Standard Labour rate = “57350 = Rs. 21625 If no sick leave is availed of, the labour cost wi : (300 ~ 30) or 270 days of 8 hours esch <> henge Seto and effective working hours we Rs. 5,400 Labour cost per hour = Problem 42. A contractor uses,a labour group of IW skilleg jobs. The contractor wishes t0 charge oat the vy, information for the group is as follows mall contract ‘tnd three unskilled workers to do small © ty basis. ‘ork done by this group on an hour di Scanned with CamScannerLABOUR 289 One skilled worker 40 working hours per werk ie of working hours 10% of working hours «Norm it Three weeks on full * “Three weeks on full pay Holidays per annem pay plus bonus of Rs. 200 per annum Rs. 240 R160, » (age rate per hour : . Food allowance per 90 working week Rs. 1200 Rs, 800. “ing allowance per vsking wesk ® Rs. 1800 Rs.12-00 Non-contributory pension "fund — employer's payment . . peranaum Rs. 106-00 ‘You are required to calculate a labour hour rate for the group assuming fifty two weeks per year. ution : = Skilled Unskilled Rs. Rs. Wag Rs, 2:40 x 40x 52 4,992 Rs. 1-60 x 40x 52 3,328 © Holiday bonus 200 - Food allowance (49 weeks i.e., 52 weeks tess 3 weeks for holiday) 588 392 Lodging allowance (49 weeks) : ‘ 882. (588 Pension fund : 106 6.768 4,308 7 “ Rs. Toul Wages Cost = Rs. 6,768 x 2 (workers) 13.536 Rs, 4,308 x 3 (workers) _ Working hours 49 weeks x 40 hours Less: Idle time @ 10% Effective hours of work ; 1,764 Effective Labour hours : 1,764 x 5 (workers) = 8,820 o = Rs.26.460 labour rate = BS: 26800 ~ Rs, 3.00 per man-hour (or Rs. 1S per group-hour) Problem 44. A light enginceriny i iti 1g factory has two produgtion shops. Initiully it was deci ji ‘ ded 1 the direct me (both basic wages and deamess allowance) at Re. 0:50 and Re. 0:65 i hou respectively ‘management subsequently desired to include for recoveries of other benefits at 1 ent towards B.S.1., 84 ee Cae per cent towards provident fund, 12} per cent towards other concessions 0” iS. The toll hours booked to the jobs amounted to 22,000 hours and 24.600 ‘hours "ipectively. The ill i mop © wages bil including all nefits forthe period came to Rs, 17,482 an RS 25,725 Calculate the umount of wages recovered and state ho a ference: s Fe ‘ta y dt ft s A Id treat the dil Cost Basu - 20 Scanned with CamScannerTHEORY AND PRACTICE OF COSTING Solution ; . Shop 1 Shep Re. Ke, Basie Wages and Dearness Allowance 05000 6s, ESL@1t% 00062 Oem 0.0417 os, Provident Fund @ 8} % ‘. 1 Other concessions @ 125% 3 s ' Revised rate of recovery per hour 06104 * L185 Total hours booked 22,000 ih Total Wages recovered : Rs. Rs. 22,000 x Re. 06104 13,429 eS 24,600 x Re. 07935 y 195% Actual Wages paid 17,482 wns Difference being under-recovery 4,053 “6205 The amount of under-recovery may be recovered from the jobs of respective departments applying supplementary rates for direct wages. Alternatively. the umount of under-recovery may be included in the overheads of the sespective departments to be recovered from jobs ws a percentage of direct wages. Problem’45. Calculate the earnings of workers A and B from the following particulars for a month, and. allocate the earnings of each to Jobs X, ¥ and Z: . A 8 (a) Basic wages ae © Rs, 100 Rs. 100 (b) Dearness allowance 50% 55% {c) Provident Fund (on basic wages) ; 8% se (d) Employees’ State Insurancé (on basic wages) 2% *% (¢), Overtime work ‘ “10 hours = () Idle time end leave = 16houss ‘The normal working hours forthe month is 200 hours. Overtime is pad for at double the normal of wages plus D. A. Employer's contribution to state insurance and proyident fund are at equal ‘with the employees’ contribution. The month contains 25 working days, and one paid holids)- The 1wo workers were employed on Jobs X, Yand Z in the following proportion : Job: A x. Y 4 ’ 40 0 30 Ovenime was done “me 2 2 on Job ¥ [1CWA, Inlet Scanned with CamScanner291 tapour eee solution cntewtaion of Rate per Hour: uw) 6 A A Rs. Rs. 100 100 Basic Wages Deamess Allowance 50% 50 55% ; 55 Provident Fund 8% on basic 8 8% on basic 8 Employces’ Stute Insurance 2%: onbasic => _2 2% onbasic __2 Normal working hours for the month Rs Normal rate per hour : . . Rs. 150 op, 4. Ovenime rate perhour: 2x —Hog =Rs. 5S. (2) Allocation of Labour time 10 Jobs : JobX — JobY = JobzZ Hours Hours Hours 80 60 o ‘A: 200 hours in the ratio of 40: 30: 30 Overtime B: (200 = 16) of 184 hours in the ratio of 50: of Earnings of Workers and Allocation to Jobs : = 10 _- 92 368 55-2 Q) Calculation JobZ Total 60 x0-80=Rs. 48:00] Rs, 16000 15-00 Rs. 175-00 80x 080= Rs. 6400] 60 x080=Rs. 4800 A — Notmal Wages | 19x 1-502 Rs. 15-00 —Ovenime Wages $5.2 x 0825 = Rs. 45:54] Rs, 151-80 38 x 0825 B —Novmal Wages | 92 x0 825 Idle Time and Leave Wages (see Nove) (16 x 0825) 13:20 Rs, 139.90} Rs. 93:36 Rs. 93:54} Rs. 165-00 Tote Tle hme and leave wages wil ube charged tothe jobs, but willbe recovered as overhead Problem 46. fesiae the normal and overtime wages payable to a workman on the basis of the following ticulars : , : Days Hours warked Monday 9 Tuesday 8 Wednesday 0 Thursday : u Friday 9 Saturday 5 Scanned with CamScannerm THEORY AND PRACTICE OF COSTING izes is Rs. 1°25 per hour, | Normal working hours are 8 hours per day and the normal rie of wa Osertime pay is at the undernoted rate : oe at double rate, of upto 48 hours in .¢more beneficial 10 the workman, {C.U., B.Com. (Hons) ' Upto 9 hours in a day at single rate and over 4 hours in a day at \ week at single rate and over 48 hours at double rate whichever Solution : wworked ‘Statement analysing Hours Monday, Tuesday Wednesday Thursday » Friday” Saturday (see Note) Normal Wages 45 hours @ Rs. 1:25 5625 Overtime Wages : Single rate 4 hours @ Rs. 1-25 5:00 Double rate 3.-hours @ Rs. 250 750 Total Wages Alternative Basis: 48 hours at single rate of Rs. 125 ‘4 hours at double rate of Rs. 2:50 10.00 aa) . Total Wages 7000 Wages shall be paid according tothe alternative basis (i... Rs. 70) as this is more beneficial to the « workman, . Note: Assumed that Saturday is a full working day. Problem 47. Compute the direct lubour cost of Job A from the following data : Days Monday Time employed in hours Worker X Worker Tueway : 3 10 Begrerns, ‘ Wednesday 7 9 10 y Thursday 10 u Friday . u 10 Saturday 6 5 6 4 (a) Normal working hours on week days a bd. Oversims is pail frm double the seas Le and on Saturday, 4 hours. ates. (c). Normal rates of daily wages : X Rs. 6, YR: YRS. 4. Scanned with CamScannerfour hours’ work on Saturday i paid frat full day's wages, Work on Saturday . aes ie poun is treated as overtime und is paid fort 1 times the normal vork and beyond that at double the normal rute. a ‘ales up t0.a total of 8 hours’ } D.A.fusto be added tothe folal wages including overtime, at 0% of wages « ‘i ticwa, Inter.] solution : Statement analysing Hours Worked ——__| Hours Worked Overtime Hours x Y = x | Double | One and One and Rate_| Half Rate Half Rate ; 10 | & 8 8 2 Monday a 7 = wet 9 | 10 8 8 ' 2 = ieee io Jou 8 8 2 3 _ adsy mw | 10 8 & 3 2 - Friday Ea (ele Ute EE =.= canter 6 | 4 8 8 at — = ue Tol sz | 48 | 4 fas [8 7 = Sote: (1) On Saturday 4 hours* work is equivalent to 8 hours’ work, because atte :ndance for $ hours on this day is treated as normal day of 8 hours. ‘ Computation of Direct Labour Cost of Job ‘A’: Rs. Rs. X— Normal Wages : 46/hours @ Re. 0-75! per pour . 3450 Overtime Wages : Double rate : 8 hours @ Rs. 1-50 perhour —- One and half rate : 2 hours’@ Rs. 1-125 per hour D.A.— 50% of Rs. 48°75 ; - B43 ¥— Normal Wages : 45 hours @ Re. 0:50! per hour ‘2250 Overtime Wages : Double rate : 7 hours @ Re. 1-00 per hour _700 ; "2950 DA. — 50% of Rs. 29:50 44-25 Total 11738 Note: (1) Normal hourly wages: -* x: 484 orpe.075. -- ¥; BSS or Re. 050. Problem 4g, 1, 20 unskilled group bonus 4 Gectory operates a group bonus scheme in which 20 skilled, 15 semi ae PPetatives and 10 junior operatives participate: Time saved on good units product Scanned with CamScannerTHEORY AND PRACTICE OF COSTING ms jime spent On them. week when SO hour, jobs is shared i ion tothe ti nl = i ih ene be fallow information is recorded. es oy by each em Skilled — Semi-shilled” — Unshineg a linc, 20 2s 9 No. inthe group ” 3 a i Hours spent on bonus jobs Bi) hoe) peed Base rate per hour s 3 . iy Percentage of base rate at whic _ hours saved ure paid (bonus) 50% 7% am Production detuils for the week ; Product (unit) ; : i Q ‘ Bonus time ullowed per dnit (in minutes) is 0 f Gross units produced (bonus) i 3500 31m Units rejected on which bonus time ; allowance withdrawn 200 500 wo Additional information : The company operates a 40-hour weck. Overtime is paid for at: (a) Time plus one-half forthe first & hours in excess of 40 hours. (6) Double time for hours in excess of 48 hours. Calculate : (a) Bonus hours entitlement of each grade of labour. (6). Bonus payable to : (i) cach grade of labour : : (ii) cach operative. (€) Gross wages payable to cach operative. Solution : | (a) Bonus hours emittement ; : Time allowed P ° R Tord Gross units produced Rejects ed - Syst ae Good units produced Ton. =e on: Bonus time allowance i) 3.000 4.000, er unit (minutes) Total bonus time allowance 18 2 » _ (hours) ao * 99 Time taken (bonus jobs) —250 1,000 1,500 i Male skilled . . Male semi-skilled : 20x24 = 480 Mule unskilled. 25 x24 = 600 Juniors 20 x 30-= 600 10 x 40 = 400 208 Time saved (hours) Toe Scanned with CamScannerLABOUR 2s Borushoursenttlement of cach prac of labour (time saved is shared in proportion to the time spent ‘on bonus jobs) * Total Skilled ~— Semi-skilled —Unskilled — Juniors Time taken S 2.080 480 600 600 400 Time saved (12: 15: 18: 10) 670 ASS 193 193 129 8) Bonus payable > . Grode Skilled — Semi-skilled —Unskilled Juniors Bonus hours entitlement 155 193 193 129 ‘Base rate per hour Rs.4 Rs.3 Rs.2 Rel Percentage of base rate at which hours saved are paid as bonus 50% 40% 30% 20% ‘Bonus rate per hour Rs.200 Rs.1-20 —-Re.060 Re.0:20 ‘Bonus payable to cach . grade of labour Rs.310 Rs. 231-60 Rs. 115:80 Rs.25-80 No. of operatives 20 25 20 10 ‘Bonus payable to cach operative Rs. 15:50 Rs.9:26 RS.5-79 Rs. 258 fc) Grass Wages payable : Grade Skilled Semi-skilled —Unskilled Juniors ‘Nonna! hours payable 40 40 40 40 ‘Overtime hours payable 10 10 10 10 Qrertime premium hours payable (8 x 0-5 + 2x 1) 6 6 6 Rate per hour * Rs. 3:00 Rs. 2:00 Re. 1-00 Grade Senii-skilled Unskilled — Juniors Rs. Rs, Normal pay 120-00 80-00 Overtime pay 30-00 2000 Overtime premium 18-00 12-00 Bonus 5:79 Total Wages per employce 1779 Problem 49, Milting section of a factory engages 25 direct workers. During the month of April 2002, they were aid for 4,800 normal attendance hours at an average rate of Rs. 1°50 per hour. In addition, they ‘tho worked for 400 overtime hours at double rate, The overtime was necessitated by abnormal ‘Sicumstances in February. 2002, For the purpose of reckoning labour cost, 40% is to be added to PRs wages for fringe benefits. From the following particulurs work out the total labour cost and itt different cost elements etc, (6) Hours booked to jobs 4.200 18) Allowed idle tiine ie : 2 (0) There eas no incidence of abnormal ile ti Mandard set for the purpose. Actual idle time was exactly in accordance with Scanned with CamScanner\CTICE OF COSTING 296 THEORY AND PRA Solution : 4,800 Normal attendance hours ‘500 . Overtime hours iam : Total working hours : 2 which is equal to the actual id Normal idle time : 12y % of 4,800! hours or 600 hours ‘Actual idje ling (4,800 = 4,200) of 600 hours. a0 tet ues nn ‘Note : (1) Idle time has been calculated on the basis of normal ce hours, overtime hours did nt have any idle time. Jame Total Labour Cost : & Normal Wages *. $,200 hours @ Rs. 1-50 per hour ~ . 7809 * Overtime Premium 400. @RS.150 + 0 Gross Wages: ta - Sa ‘Add : Fringe benefit 40% of Rs. 8.400 30 Tegal : “Ma, Allocation : To be charged as Direct Labour— _ Rs. Rs Wages for time spent on production (4.200 + 400) or 4,600 hours @ Rs. 1-50 6.900 Add : Fringe benefit @ Rs, 40% , 2,760" 966 To be charged 10 Costing Profit and Loss Me (sce Note 3) — Sarees Overtime premium 400 hours @ Rs, 1-50 f 600 Auld : Fringe benefit @ 40% Z 240 oe To be charged as Production Overhead (Standing Ordet No. ..)— ae Wages for normal idle time : 600 hours @ Rs. 1:50. 900 Add: Fringe benefit @ 40% ~ 360 126 Total —~ Te ‘nommal rate is overtime premium, @) Since overtime was necessitated weillen off to costing profit and i Problem 50, by abnormal circumstances, overtime premium shod oss account, ‘An analysis of the time card of a 7 wor worked 45 hours (including 4 hours mie machine breakdown, ° The rate of the worker is Re, | Per hout "| Per hout; but overtime is pai You are required to allocate the TH ine eoteeces . * 8 machine shows that, out of the ttl 48 10% 5 ©” production and that 3 hours were idle tim ‘indie total wa . and ‘indi tabour, indicating reasons thereton wages paid to'the worker betwoen ‘irect and Solution : : ‘Amount of Wages paid to the worker : Normal Wages 48 hour, | Overtime Premium ava aes per hour 4 Tag CREOSD ws 3B Scanned with CamScannerLABOUR ged us dircet: gages OCT Re. I NA sn OTe writen of to Coating Profitund Loss Ale sn Po be charged to Coning Profit Lows Ne i i 1 s@Re.t rot 3 ‘otal . 4 rt a semium may be considered as indirect (vz. a part of fuctory overheud) on the asuinp- cysts Pre was necessitated Juc (0 temporary increave in work, If overtime is worked due to snthat Ov xs’ specific request to expedite dclivery, overtime premium ix to be Charged us direct homer job. If, on the other hand, overtime is worked Ue to abnormal factors e.g, breakdown ine. flood, earthquake etc.), the overtime premium is to be charged to Costing Profit and tamale Inthis eas it is assumed that overtime work was required forthe los of normal working tne due to breakuown of machinery. eine due to breakdown of machinery is abnormal in nature. Hence it has to be charged 19 Conting Profit and Loss A/c? Problem 51. A manufacturing concern's basic wage rate is Rs. 2 per hour and it pays evening overtime and folday overtime at one und a half times and tis the basic rate,respectively. In a year the normal working hours, evening overtime and holidiy overtime amounted to 3,85,000 hours, 35,000 hours 294 $0,000 hours respectively.’In euch of the following circumstances calculate the labour cost chargeable o a job which required nonnal time, evening overtime and holiday overtime of 10,000 tous. 1200 hours and 100 hours respectively. . () Iovenime is worked regularly throughout the year as a matter of policy duc to labour shortage, (") Tovenime is worked irregularly to meet spasmudic production requirements. (w) Woverime is worked specifically at the customer's request to expedite delivery. Gvcreaons for your answer. [C.U,, B.Com. (ons.}} Solution : . : bac Wage rate Bie Be i H oo i tt Overtime rate Rs. (2x3) m fe Ny Ovenime rate Rs, (2 x 2) Tout Wages forthe year : Non "nal time 3,85,000 hours @ Rs.2 35,000, @Rs.3 50,000", @Rs.4 %Ovenime My Overtime Avera i . “* Wage rate for the year =f 150 Rs, 2-287 per hou Scanned with CamScannerTING Kidd THEORY AND PRACTICE OF COS First Case: sre and hax been taken as a matter of policy due to labour bed (i. al time + evening over j for the total hours worked (j.¢.,. normal a shortage, the job should be charged forthe t . rian + halidoy overind) ut the average wage rate forthe year. aisanaige castes ob when \hich has been done during overtime hours ta higher rate nd t0¢ : done during normal hours ut a lower rate. The labour cost chargeuble to the job will be : (10.000 + 1.200 + 100) 0 11,300 hours @ Rs. 2.287 = Rs: 25.643:10 Since overtime is u regular feuture h Second Cuse : , : : i : “ Since overtime is a temporury and imegular feature here just to meet spasmodic Production requirements, the job should be charged for the total hours worked (i + normil time + evening vertini + holiday overtime) atthe basic wage rate and the overtime premium should be considered 3 production overheud to be recovered on somne equitable busis. The lubour cost chargeuble to the job will be : . 11,300 hours @ Rs, 2.= Rs. 22,600 Third Case : . Since overtime, in this ‘case, is worked duc to the customer's specific request to expedite delivery, it $s Proper to charge the normal wage and overtime preinium dincily to the job. . The lubour cost chargeable to the job will be : Rs. 10,000 hours @ Rs, 2 20,000 “1200. @Rs.3 . 3,600 100 @Rs.4 400 24,000" Problem 62, : arch, 2002. the plant was operating at full sand all other jobs worked on, in March, are Job 1001 All other jobs Total a Rs. Fs, Materials. Direct labour oe pe Overtime premium 2 oe} I lini = i *. a ee eS ; head incurred in Murch, 2002 amounted (0 , is ul the busis of direct lubour costs. You are required t oF loss on Job Nu. 1001 would be. using two urn. Assuine that the contract price for this job is Sach inethod should be used : (iii) state whethet rch, 2002 would be uffected by the choice of one Rs, 40,000 ; (ii) indicute under whut citcumstances, the overall profit ur loss of the. ‘company during Mug ‘method or the other. Scanned with CamScannerr Qe - 0B ay Job No, 1001 considering Ove oof 7 set pout (12,000 + 4,000) one 54 (100% of dircet labour) (sce Note) ove | qoual Cost | contract Price | Loss } Total direct labour cost including ‘overtime premium is Rs. (40,000 + 4.000) or. Rs. 44,000 Mee diotal overhead is Rs, 44,000, lence percentage of overhead to direct labour is a0, 44,000" {00 or. 100%, : profess on Job No. 1001 considering Overtime Premiwn as par of Overhead pe RE Moteril 10,000 Direct Labour 12,000 Overhead (120% of direct labour) (sce Note) 14.400 Tatl Cost 36,400 Contract Price 40,000 Profit 3.000” ‘Note: Total direct lubour cust is RS. 40,000 and total uverhead is Rs. (44,000 + 4.000) or Rs. 48,000. Hence, percentage of overhead to direct labour fs a x 100.or 120%. (i) Wovenime has to be paid specifically for a job (¢.g., when at the customer's request itis to be ‘completed before the normal date of delivery agreed upon). the amount of overtime premiumis Somidered as direct labour and added to the*cost of the job for being recovered from the ‘ostumer concemed. If, on the other hand, overtime hus to be paid duc to a temporary increase ‘nthe volume of work,, the amount of overtime premiuin should be considered as part of ___ oluction overhead for being allocated to different jobs on some equitable basis. [NT overall profit or loss of the company for March, 2002 will noi be affected by the choice of "f Method because the total cost for the month remains the, same [i.e RS. (60000 4.000 + 4,000 + 44,000 ) of Rs. 1.68,000). Probe 59, ‘ti ; workers owing ioe ; : sic "1 att information relates tothe week ending on 25th November, 201 foe Vigttsee ; F beating ni z 1,800 Nesllowed 3ininutes > tg : per dozen to Ciectea pea by My ny ‘arly wage on ans Morkeq Bee a Scanned with CamScanner“OSTING 30 THEORY AND PRACTICE OF C' Tree Taxon as hie rat it yc 7 hours. the first 6 hours of overtime being rid at ting plus one-half. Bonus is paid @ ards of the basic rate e ‘ejected output, The busie working week is plus one-thind and the next six hours at hee a tabuloted summary orm for each employee Using the information given above, present mean ei (a) Number of bonus beues earned ia eae a ae pera aed mace ld ee a ere het. (i) regukrly throughout the set compny policy eet fitout anise tnd (ii) specifically at the customer's request (0. expedite delivery. UICWA, Inter 1 Solution : Hours worked Normal hours Overtime hours Time allowed Time taken Time saved Units produced Rejects Accepted units 2412 Accepted units indozen (1,356 = 12) M3: @a412#12) 201 Basic Wages (48 xRs. 4) 192 (S4xRs.6) , 324 Overtime Premium (6x 4 xRs.4) 8 6x LxRs.6) R ‘ 6x} xRs.6) 18 Bonus CF x27eRs.4) 72 CP eiaers.6 48 Gross Wages 2 2 Direct Wages Cost : (2) When overtime is worked as a company Policy due to labour shortage : Basic Wages “192 aM Bonus n : ee Total 264 . 2 Direct Wages Cost per dozen ‘ae (264 113) Rs. 234 G78+201) Rs 185 (6) When overtime is worked ut customer's Direct Wages Cost per dozen Q72=113) Rs, 2-41 # (1) When overtime is worke shortage, average hourly request : , (402+ 201). R200 Note 'd regularly thoughout the year as a company policy due 10 a Fate’of wages for the whole year should be ascertained (RIMS ‘ale normal as well as overtime hours), and ‘wages at this averse Job us direct wages for the total hours worked shereon, This poe however, does not provide information for determining averuge rate of wages for tM Hees fe "Re Purpose of answering this problem overtiv Premium has been treated 35 overhead. Scanned with CamScannerLAUOUR m1 a atime is worked a the speifi requot of the custome, when ov Overtime prem 2) Tested ab direct MAKES, Premium witl be weal Summary Statement owt owt corned Direct Waget when Overtine Overtime i regular Premium Amount of Bons. Direct Wages when wor problem 54. , Ain murufatures standard electronic component used in television sts, The details of current * acs ofthe firm are as follows :* Noofvorkers employed . i Wecly working hours (including lunch break) m4 vcore number of hours lost due to idle time per employee per weck : Sundatd time required per unit Houly wage rate a a Curent level of efficiency on For every unit old the compuny is gettin 1 Cush profit of Rs. 120 before charging labour cost (ie. iction (only cash expenses), excluding labour cost}. |hvicw ofthe increasing demand for the product. the fjtm eamie to an agecement with the labour ron W tube the wage rate.by Rs. 3 per hour in retuen for the workers reducing the idle time by ‘hour nd raising the operational efficiency to 90%. Escluute the impact of the decision on the firm's profits. sup of sales value over cost of produ LICWA, Inter. Dee. 02} Solution Comparative Statement Under revised agreement 100 x48 4,800 hours salable abou 's about hours per, week : i “* Witour hours fost due to» ° «idle time 4,800 hours 100 x 48 “00 x4 400. 4.400 hours AA00 hove 9 200 units Thours 100 x 8 800 4 4.000 hours A000 hoUR, 2,000 units Zhours “h.¢ Labour houry ‘100% efficiency "efficiency wonltteney available Log . «Hetteaag table evel 980 Pt teh : yy. var cg git charging , wi ‘eo 0 @ Rs. 129 per unit nella soto Cost 4.500 «1S we its 120,000 dary, A S120 “sed apecement cash profit will increase by Rs. (15 Scanned with CamScannerTICE OF COSTING 302 THEORY AND PRA‘ . Labour turnover Problem #6. fei ~ department calculate the labour lover, From the following data given by the personne applying : (a) Separation method ; (6) Replacement method ; (c) Flux method. Number of workers un the payroll : on At the beginning of the month Fp At the end of the month ; eioreia During the month. 10 workers Icft, 40 workers were diechargel oe i ae workers We cen few these, 25 workers are recruited in the vacancies of those leaving, expansion scheme, Solution : Labur turnover rate : (a) Separation method : Nuniber of workers icaving 199 “Average number on payroll 210440, 199. =a * 100 = 5%. (6) Replacement method : Number of workers replaced ‘Average number on payroll * 100 (6) Flux method : Number leaving +. Number joinin, ‘Average nuniber on payroll = 50425 iq) 100 *100= 75% Problem 56, The cost accountant of ¥ Lid. f 2002 as 10%, $% and 3% res method". If the number of workers repluccd during that i i) worken : . r quarter is 30, find (i) wot feervited und joined, und (i) workers left end discharged MMe ae ae ” Solution ; ° Average number of workers on payroll: 8 x 100 tech puted labour turnover rates for the quarter ended 31st March. Pectively under “Flux method’, ‘Replacement method! and “Separation Labour tumovor rate (Replacement method) = Number of worken replaced 100 : ‘Average nuinbet on payratt” * | Sp : 100. ‘Average numnbsr on payroll Of Average number of workers on payrott = 30x10 _ sim. 600, Scanned with CamScanner