A skilled worker in Shanu Ltd. is paid a guaranteed wage rate of 30 per hour. The standard time per unit for a particular product is 4 hours. Sam, a…

CA Intermediate · Cost and Management Accounting · MTP · May 2024
A skilled worker in Shanu Ltd. is paid a guaranteed wage rate of 30 per hour. The standard time per unit for a particular product is 4 hours. Sam, a machine-man, has been paid wages under the Rowan Incentive Plan and he had earned an effective hourly rate of 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%)?

Suggested Answer and Working Notes:

Total earnings and effective hourly rate of skilled worker (machine man Sam) under Halsey Incentive Scheme (50%) Let T hours be the total time worked in hours by the skilled worker (machine-man Sam); ₹ 30/- is the rate per hour; standard time is 4 hours per unit and effective hourly earning rate is 37.50 then Earning = Hours worked × Rate per hour + (Time saved / Time allowed) × Time taken × Rate per hour (Under Rowan incentive plan) 37.5 T = (T × ₹ 30) + ((4-T)/4) × T × ₹ 30 37.5 = 30 + (4 – T) × ₹ 7.5 Or 7.5 T = 22.5 Or T = 3 hours Total earnings = (Hours worked × Rate per hour) + (1/2 Time saved × Rate per hour) (under 50% Halsey Incentive Scheme) = (3 hours × ₹ 30) + (1/2 × 1 hour × ₹ 30) = 90 +15 = 105 Effective hourly rate = Total earnings / Hours taken = 105 / 3 hours = 35

Topics: Employee Cost & Direct Expenses

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