Labour costing

1. Workers payment ( Production Basis ) ( Mr A 5,000 units X 5 = 25,000)

2. Time Basis ( 40hours X 200 = 8,000)
Workers earning
Mr A = 40 hours = 2000 units 200 per hour
Mr B = 40 hours = 2400 units 200 per hour

Normal wage, regular wage , Guaranteed pay

Incentives
Those worker who are producing more than our company standard production
50 units per hour X 40 = 2000 units
Ab mai ye janna chahta hun k Mr B ne jo 2400 units banye hain in ko banana k liye kitne hours
required the as per our standard
Standard hour required to produce 2400 units = 2400/50=48 hours
Saved Hours = Time Required – Time Taken
Saved Hours = 48 hours – 40 hours
Saved Hours = 8 hours

100% Bonus Plan = (8 X 100%) X 200 = 1600

80% Bonus Plan = (8 X 80%) X 200 = 1280
50% Bonus Plan = (8 X 50%) X 200 = 800

Workers Earnings
A = Normal wage
A = 40 X 200 = 8,000
B = Normal Wage + Bonus
B = 40 X 200 + (48-40) X 100% X 200
B = 8,000 + 1600
B = 9,600

2400 units banaye , 40 hours , One hour production Rate = 50 units

Actual production / Standard production per hour = Standard hours Required
2400/50 = 48 hours
50 X 48 = 2400
50 * X = 2400
X = 2400/50
X = 48 hours
Worker A
Units Produced = 1,080 units
Standard hours required to produce 1,080 units = Actual Production / Standard prod per hour
Standard hours required to produce 1,080 units =1080/30 = 36 hours
Worker A does not meet the required production Rate, so we only pay basic wage
Normal wage = Hours Worked X Basic rate
Earning = 40 X 15 = 600

Worker B
Units Produced = 1,320 units
Standard hours required to produce 1,320 units = Actual Production / Standard prod per hour
Standard hours required to produce 1,320 units = 1320/30 = 44 hours
Time saved = Time Required – Time Taken
Time saved = 44 hours – 40 hours = 4 hours

Earning = Normal wage + Bonus

Earning = (40 X 15) + ( 44-40) X 100% X 15
Earning = 600 + 60
Earning = 660

Worker C
Units Produced = 1,500 units
Standard hours required to produce 1,500 units = Actual Production / Standard prod per hour
Standard hours required to produce 1,320 units = 1500/30 = 50 hours
Time saved = Time Required – Time Taken
Time saved = 50 hours – 40 hours = 10 hours

Earning = Normal wage + Bonus

Earning = (40 X 16) + ( 50-40) X 100% X 16
Earning = 640 + 160
Earning = 800

Total Earning = 600 + 660 + 800 = 2,060

Unit Labour cost = 2060/3,900 = 0.528/unit

Unit Over head cost = FOH/Units Produced

Unit Over head cost = ( 40 X 20)/2060
Unit Over head cost = 0.388/unit
200 kg in hour Standard production rate
220 kg in hour actual production
Excess production in an hour = 20 kg
Excess Production ka rate find out karna hai on the basis of standard production
Excess Production Rate = Excess Production/ Standard production *100 = 20/200*100 = 10%

1. Excess Production Rate

2. The half of this percentage must be applied on the hourly wage rate to find out bonus rate
per hour
Skilled Labour
Semi skilled labour
Unskilled Labour

Days Hours worked Production in Kgs

Monday 79 16040
Tuesday 80 17599
Wednesday 74 16200
Thursday 78 17429
Friday 80 18036
Total 391 85,304
Standard production
Hours worked X standard production rate per hour
391 X 200 = 78,200
Is group ne 391 hours kam kiya aur us mai 85,304 units produce kiye but company ka standard
keh raha is time period mai 78,200 units produce hona chaiye the

Excess Production Rate

Excess production rate = ( Actual production – Standard production)/ Standard production *100
Excess production rate = (85,304 – 78,200)/78,200*100
Excess production rate = 9.08%
This group’s Production extends by 9.08% as compared to standard production.

Bonus Rate / Hour = Excess Production Rate X 1/2 X Per hour wage rate
Bonus Rate / Hour = (9.08% X 1/2) X 480
Bonus Rate / Hour = 4.54% X 480
Bonus Rate / Hour = 21.80

Group Bonus for Each and Week

Days Hours worked Bonus Rate Per Bonus Amount
(a) hour (b) (a X b)
Monday 79 21.80 1722.2
Tuesday 80 21.80 1744
Wednesday 74 21.80 1613.2
Thursday 78 21.80 1700.4
Friday 80 21.80 1744
Total 391 21.80 8523.8
 Weekly Earning of Each Employee
Actual hours worked by each employee = 391/10 = 39.1hours
Normal wage (39.1 X 480) Rs. 18,768
Bonus ( 39.1 X 21.80) 852.38
Weekly earning of each employee 19620.38

Employees Status Hours Rate Regular Overtime Total Deductions

(a) (b) wages Group PF Net pay
Wage(aXb) Insurance
Imran Direct 40 50 2,000 600 2600 32.5 78 2489.5
Kamran Direct 40 50 2,000 450 2450 30.625 73.5 2345.87
Adnan Direct 40 60 2400 630 3030 37.875 91 2901.22
Arif Direct 40 60 2400 - 2400 30 72 2298
Atif Indirect 40 35 1400 - 1400 17.5 42 1340.5

Computation for Overtime

Imran = (8 X 150%) x 50 = 600
Kamran = (6X 150%) X 50 = 450
Adnan = (7 X 150%) X 60 = 630
Earning using straight piece work plan
Production/ units produced/ out put X Per unit rate
Per hour rate = Rs. 600
1 hours = 60 minutes
Standard production per min = 4
Standard production per hour = 4 X 60 = 240 units per hour
Ager is ko one hour k 600 mil rahe to hum ye keh sakte hain k asal mai is 240 units banana k 600
mil rahe hain
Standard rate per unit = Rate per hour /Standard production per hour
Standard rate per unit = 600/240 = Rs.2.5/unit

Imran’s Weekly Earnings

Days Production Rate/unit Earnings
Monday 2000 2.5 5000
Tuesday 1930 2.5 4825
Wednesday 2100 2.5 5250
Thursday 2050 2.5 5125
Friday 1900 2.5 4750
Total 9,980 24,950

600/60 = 10/min
10 4 units k hain
10/4 = 2.5