The existing incentive system of Sakshi Limited is as under: Normal working week 5 days of 8 hours each plus 3 late shifts of 3 hours each Rate of…
CA Intermediate · Cost and Management Accounting · RTP · September 2025
The existing incentive system of Sakshi Limited is as under: Normal working week 5 days of 8 hours each plus 3 late shifts of 3 hours each Rate of Payment Day work:160 per hour Late shift:225 per hour Average output per operator for 49-hours week i.e. including 3 late shifts 240 articles In order to increase output and eliminate overtime, it is decided to switch on to a system of payment by results. The following information is obtained: Time-rate (as usual):160 per hourBasic time allowed for 15 articles: 2.5 hoursPiece-work rate: Add 20% to basic piece-ratePremium Bonus: Add 50% to time. If during the last week 270 articles are produced in a 40-hour week. Required: (i) CALCULATE weekly earnings for one operator under the following systems: (a) Existing time-rate (b) Straight piece-work (c) Rowan system (d) Halsey premium system (ii) PREPARE a Statement showing hours worked, weekly earnings, number of articles produced and labour cost per article for one operator under the above systems.
Suggested Answer and Working Notes:
(a) (i) Calculation of weekly earnings for one operator under different systems: (a) Existing time rate Weekly wages: Normal shift (40 hours × ₹ 160):6,400Late shift (9 hours × ₹ 225):2,025 Total:8,425 (b) Piece Rate System 15 articles are produced in 2.5 hoursTherefore, to produce 270 articles, hours required is (2.5 hours / 15 articles) × 270 articles = 45 hours. Cost of producing 270 articles: At basic time rate (45 hours × ₹ 160) = 7,200Add: Bonus @ 20% on basic Piece rate = 1,440 Earning for the week = 8,640 (c) Rowan Premium System (i) Time allowed for producing 270 articles = (2.5 hours / 15 articles) × 270 articles = 45 hours. (ii) Time taken to produce 270 articles = 40.0 hours (iii) Time Saved = 45 – 40 = 5 hours Earnings under Rowan Premium system: = (Time taken × Rate per hour) + (Time saved / Time allowed × Time taken × Rate per hour) = (40 hours × ₹ 160) + (5 hours / 45 hours × 40 hours × ₹ 160) = 6,400 +2,844.44 = 9,244.44 (d) Halsey Premium System = (Time taken × Rate per hour) + (1/2 × Time saved × Rate per hour) = (40 hours × ₹ 160) + (1/2 × 5 hours × ₹ 160) = 6,400 +400 = 6,800 (ii) Statement showing hours worked, weekly earnings, number of articles produced and labour cost per article Method of Payment Hours worked Weekly earnings (₹) Number of articles produced Labour cost per article (₹) Existing time rate 49 8,425.00 240 35.10 Straight piece rate system 40 8,640.00 270 32.00 Rowan Premium System 40 9,244.44 270 34.24 Halsey Premium System 40 6,800.00 270 25.19
Topics: Employee Cost & Direct Expenses
Related Questions in this Topic
- The following expenditures were incurred in Aditya Ltd. For the month of March 20X8: Amount (₹) (i) Paid f...
- The existing incentive system of Alpha Limited is as under: Normal working week 5 days of 8 hours each plus 3 late ...
- A company manufactures two products X and Y. Product X requires 8 hours to produce while Y requires 12 hours. In April, ...
- Pre-determined factory overhead rate was ₹ 15 per labour hour. Actual labour hour worked 60,000. Actual factory overhead...
- Mr. A works in a manufacturing company where he is paid bonus according to the Halsey 50% plan, besides the normal wages...