CA Jasmeet Singh 1

Employee Cost
Wage Cost and Incentive Plans

1. Calculate the earnings of the workers A, B and C under Straight Piece Rate System and Time
Rate System from the following particulars:

Normal rate per hour Rs.54

Standard time per unit 1 Minute

Output per day is as follows: A=351

B=405
Worker A 390 Units C=540
Worker B 450 Units
Time- 432
Worker C 600 Units
Working hours per day 8 hours

2. From the following particulars you are required to work out the earnings of a worker for a week
under:
a- 450
a) Straight piece rate,
b- 360
b) Time rate, c- 367.5
c) Halsey premium scheme (50% sharing) and d- 374.4
d) Rowan premium scheme
Weekly working 48 hours Normal time taken per 20 minutes
hours piece
Hourly wage rate Rs.7.50 Normal output per week 144 pieces
Piece rate per unit Rs.3.00 Actual output for the week 150 Pieces

3. During first week of April, 2020 the workman Mr. Kalyan manufactures 300 articles. He receives
wage for a guaranteed 48 hours week at the rate of Rs.4 per hour. The estimated time to
produce one article is 10 minutes and under incentive schemes (Halsey and Rowan) the time
allowed is increased by 20%.
Calculate his gross wages according to:
a- 200
(a) Piece work with a guaranteed weekly wage, b- 216
(b) Halsey premium bonus 50% to workman, and c- 230.4
(c) Rowan premium bonus.

4. From the under mentioned information work out the total amount payable and the rate earned
per hour by three workmen under the Halsey Premium Bonus System (the bonus being
calculated at 50% of the time saved):
Standard time for given operation 10 hours
Hourly rate of wages Rs.1.00
Actual Time Taken
B 8 Hours
C 6 Hours
D 5 Hours

A-9, B-8, C-7.5

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5. A workman whose basic rate of pay is Rs.3 per hour is covered under Rowan system of
premium bonus. In addition he gets a cost of living allowance (Dearness Allowance/ D.A.) of Rs.50
per week of 48 hours.

Calculate the total earnings of the worker if during a week he worked on the following jobs:
(i) Job X for 30 hours for which standard time allowed is 40 hours.
(ii) Job Y for 15 hours for which standard time allowed is 20 hours, for 3 hours he was
not provided with any job. a- 151,575 b- 75.787 idle- 12.126 total= 239.49

6. Two workmen, ‘A’ and ‘B’ produce the same product using the same material. Their normal
wage rate is also the same; A is paid bonus according to the rowan system, while B is paid
bonus according to the Halsey System. The time allowed to make the product is 50 hours.
A takes 30 hours while B takes 40 hours to complete the product. The factory overhead rate is
Rs.5 per man hour actually worked. The factory cost for the product for A is Rs.3,490 and for B it
is Rs.3,600.
a- 210, 225
b-
You are required:
c- 3700, 3825
(a) To find the normal rate of wages,
(b) To find the cost of material,
(c) To prepare a statement comparing the factory cost of the products as made by the two
workmen.

7. Mr. A is working by employing 10 skilled workers. He is considering the introduction of some

incentive scheme either Halsey scheme (with 50% bonus) or Rowan scheme of wage payment
for increasing the labour productivity to cope with the increased demand for the product by
25%. He feels that if the proposed incentive scheme could bring about an average 20% increase
over the present earnings of the workers, it could act as sufficient incentive for them to produce
more and he has accordingly given this assurance to the workers.
As a result of the assurance, the increase in productivity has been observed as revealed by the
following figures for the current month:
Hourly rate of wages (guaranteed) Rs.40.00
Average time for producing 1 piece by one worker 2
hours based on the previous performance
(This may be taken as time allowed)
No. of working days in the month 25 days
No. of working hours per day for each worker 8 hours
Actual production during the month 1,250 units

Required:
1. Calculate effective rate of earnings per hour under Halsey scheme and Rowan scheme.
2. Calculate the savings to Mr. A in terms of direct labour cost per piece under the schemes.
3. Advise Mr. A about the selection of the scheme to fulfill his assurance.

8. A skilled worker in XYZ Ltd. is paid a guaranteed wage rate of Rs.30 per hour. The standard time
per unit for a particular product is 4 hours. Mr. P, a machine man, has been paid wages under
the Rowan Incentive Plan and he had earned an effective hourly rate of Rs.37.50 on the
manufacture of that particular product.
What could have been his total earnings and effective hourly rate, had he been put on
Halsey Incentive Scheme (50%)?
 CA Jasmeet Singh 3

Labour Turnover S- 14.28

R- 11.428
9. The extracts from the payroll of M/S Maheshwari Bros. is as follows: F- 25.714

Number of employees at the beginning of 2019 150 workers

Number of employees at the end of 2019 200 workers
Number of employees resigned 20 workers
Number of employees discharged 5 workers
Numbers of employees replaced due to resignations and discharges 20 workers

Calculate the labour turnover rate for the factory by different methods.

10. The Cost Accountant of Tirupati Electronics Ltd. has computed rates for the quarter ending 31st
march, 2020 as 10%, 5% and 3% respectively under 'Flux Method', 'Replacement Method', and
'Separation Method'.
a- 12
If the number of workers replaced during that quarter is 30, find out the number of b- 18
(a) Workers recruited and joined; c-
(b) Workers left and discharged and
(c) Equivalent employee turnover rates for the year.

11. No of workers on the payroll:

5
At the beginning of the month 900 workers 2.5
At the end of the month 1,100 workers 20

During the month 10 workers left, 40 persons were discharged and 150 workers were recruited.
Out of these 25 workers are recruited in the vacancies of those leaving, while the rest were
engaged for an expansion scheme.

12. The management of Moonshine Ltd wants to have an idea of the profit foregone as a result of
labour turnover last year.
Last year sales accounted to Rs.33,00,000 and the P/V ratio was 20%. The total number of
actual hours worked by the direct labour force was 2,40,000. As a result of the delays by the
personnel department in filling vacancies due to labour turnover 25,000 potentially productive
hours (excluding unproductive training hours) were lost. The actual direct labour hours
included 40,000 hours attributable to training new recruits out of which half of the hours were
unproductive.

The costs incurred consequent on labour turnover revealed on analysis the following:

Settlement cost due to leaving Rs.25,000

Recruitment costs Rs.20,000
Selection costs Rs.12,000 Ans- 2,10,000
Training costs Rs.18,000

Assuming that the potential production lost due to labour turnover could have been sold at
prevailing prices. Ascertain the profit foregone last year on account of labour turnover.

Calculation of Wages and Hourly Rate

13. ‘X’ an employee of ABC Company gets the following emoluments

and benefits:
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Basic pay : Rs.10,000 p.m.

Dearness allowance : Rs.2,000 p.m.
Bonus : 20% of Salary and D.A.
Other allowances : Rs.2,500 p.m.
Employee’s contribution to P.F. : 10% of salary and D.A.

‘X’ works for 2,400 hours per annum out of which 400 hours are non-productive and treated as
normal idle time.
You are required to find out the effective hourly cost of employee ‘X’. 108.6

14. In a factory working six days in a week and eight hours each day, a worker is paid at the rate of
Rs.100 per day basic plus D.A. @ 120% of basic. He is allowed to take 30 minutes off during his
8 hours shift for meals-break and a 10 minutes recess for rest. During a week, his card showed
that his time was chargeable to:
Job X 15 hours
Job Y 12 hours
Job Z 13 hours 33
The time not booked was wasted while waiting for
a job.
In cost accounting, how would you allocate the wages of the worker for the week?

15. A worker is paid Rs.10,000 per month and a dearness allowance of Rs.2,000 p.m. Worker
contribution to provident fund is @ 10% and employer also contributes the same amount as the
employee. The Employees State Insurance Corporation premium is 6.5% of wages of which
1.75% is paid by the employees. It is the firm’s practice to pay 2 months’ wages as bonus each
year.
The number of working days in a year are 300 of 8 hours each. Out of these the worker is
entitled to 15 days leave on full pay.
Calculate the wage rate per hour for costing purposes. 81.245

16. Calculate the Employee hour rate of a worker X from the following data:

Basic pay Rs.10,000 p.m.

D.A. Rs.3,000 p.m.
75
Fringe benefits Rs.1,000 p.m.

Number of working days in a year 300. 20 days are availed off as holidays on full pay in a year.
Assume a day of 8 hours.

Overtime

17. Calculate the earning of A and B from the following particulars for a month and allocate the labour
cost to each job X, Y and Z:
A B

Basic wages Rs.10,000 Rs.16,000

Dearness Allowance 50% 50%
Contribution to Provident Fund (on basic wages) 8% 8%
Contribution to Employee State Insurance (on basic 2% 2%
wages)
Overtime hours 10 hours -
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The normal working hours for the month are 200. Overtime is paid at double the total of normal
wages and dearness allowance. Employer’s contributions to state insurance and provident fund
are at equal rates with employee’s contribution. The two workers were employed on jobs X, Y
and Z in the following proportions:

Jobs X Y Z
Workers A 40% 30% 30%
Workers B 50% 20% 30%

Overtime was done on job Y.

18. A company's basic wage rate is Rs.100 per hour and its overtime rates are:
Before and after normal working hours : 175% of basic wage
rate Sunday and holidays : 225% of basic wage
rate

During the previous year the following hours were worked:

Normal time : 1,00,000
hours Overtime before and after working hours : 20,000 hours
Overtime on Sundays and holidays : 5,000 hours

The following hours have been worked on job ‘Z’:

Normal time : 1,000 hours
Overtime before and after working hours : 100
hours Overtime on Sundays and holidays : 25 hours

You are required to calculate the labour cost chargeable to job ‘Z’ and overheads in each of the
following circumstances:
a) Where overtime is worked regularly throughout the year as a policy due to labour shortage.
b) Where overtime is worked irregularly to meet the requirements of production.
c) Where overtime is worked at the request of the customer to expedite the job.

Group Scheme

19. Both direct and indirect employees of a department in a factory are entitled to production bonus
in accordance with a group incentive scheme, the outline of which is as follows:
(a) For any production in excess of the standard rate fixed at 16,800 tons per month (of 28
days) a general incentive of Rs.1,500 per ton is paid in aggregate. The total amount
payable to each separate group is determined on the basis of an assumed percentage of
such excess production being contributed by it, namely @ 65% by direct employee, @
15% by inspection staff, @ 12% by maintenance staff and @ 8% by supervisory staff.
(b) Moreover, if the excess production is more than 20% above the standard, direct
employees also get a special bonus @ Rs.500 per ton for all production in excess of 120%
of standard.
(c) Inspection staff are penalized @ Rs.2,000 per ton for rejection by customer in excess of 2% of
production.
(d) Maintenance staff are also penalized @ Rs.2,000 per hour for breakdown.
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From the following particulars for a month, compute production bonus earned by each group:
Actual working days : 25
Production : 21,000 tons
Rejection by customer : 500 tons
Machine breakdown : 40 hours

Ques- 1,5,7,12,19