SOLUTIONS MANUAL

CHAPTER

4 Accounting for
Labour Costs

Answers to Review Questions

1 (a) Total weekly labour costs (50 × 40 × RM5.50) = RM11,000
(b) Sam’s earnings:
Basic pay (48 × RM5.50) = RM264
Overtime premium (8 × RM2.75) = RM22.00
Weekly earnings = RM264 + RM22 = RM286

2 Earnings:
Alex = 200 units × RM0.50 = RM100
Ben = 180 units × RM0.50 = RM90

3 Earnings:
A = (2 minutes × 200) = 6.67 hours
Production below standard = 8 hours per day × (80% of RM3.60) = RM23.04
B = (2 minutes × 320) = 10.67 hours
Production above standard – 8 hours per day × (120% of RM3.60) = RM34.56

4 (a) Employee A: Basic pay = 46 hours × RM2.40 = RM 110.40

Overtime premium = 6 hours × RM1.20 = RM 7.20
Total earnings = RM 117.60

(b) Average ouput per hour = 120 = 3 articles per hour

40
Cost per unit = RM2.40 = RM0.80 per unit
3
Employee B produced = 160 = 4 articles per hour
40
Therefore, Employee B’s earnings = 160 units × (120% of RM0.80)
= RM153.60

5 (a) Employee A’s earnings:

Basic pay = 50 hours × RM3.50 = RM175.00
Overtime premium = 10 × RM1.75 = RM17.50
Total earnings = RM195.50
 Solutions Manual
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(b) Job 111: Direct labour cost = (20 hours × RM3.50) = RM70.00
Job 112: Direct labour cost = (30 × RM3.50) = RM105.00
(c) Overheads:
Job 111 = ( 20 × RM17.50) = RM7.00
50
Job 112 = ( 30 × RM17.50) = RM10.50
50
6 (a) Two situations in which the time basis of remuneration is likely to be more appropriate then
piecework schemes are:
• Where quality of output is more important than the quantity of output
• Where the output level is beyond the control of the worker.
(b) The five general principles that should be considered when designing incentive schemes are:
• Targets must be realistic and objectives clearly stated to all employees
• The terms and conditions of a scheme must be easy to understand and communicated
clearly to all employees
• It should be balanced sufficiently, creating a ‘win-win’ opportunity for both employer and
employee
• All employees must agree to the terms and conditions of the scheme
• Bonus payments must be promptly made upon completion of tasks by employees.