Subject: Cost Accounting

Topic: Direct Labour Cost By: Questionscastle Academic Team

Document Code: CA/IPCC/CST/00011 Q 1. Calculate the labour rate of worker X from the following data: Basic Pay `1,000 p.m. D.A. `300 p.m. Fringe Benefits `100 p.m. Number of working days in a year are 300. 20 days are availed off as holdings on full pay in a year. Assume a day of 8 hours. A worker is paid `100 p.m. a dearness allowance of `200 p.m. There is a provident fund @ 8 1/3%and the employer also contributes the same amount as the employee. The ESIC premium is 1% of wages of which % is paid by the employees. The firm pays two months as bonus each year. The number of working days in year are 300 of 8 hours each. Out of these the workers are entitled to 15 days leave on full pay. Calculate the wage rate per hour for costing purpose. From the following particulars, find out the amount required for payment of wages in a factory for a particular month: 1. Wages for normal hours worked 30,500 2. Wages for overtime 2,200 3. Leave wages 1,700 4. Deduction of employees contribution to state insurance 500 5. Employees contribution to Provident Fund 1,600 6. House rent to be recovered from the 30 employees at the rate of `10 per month. Calculate the total wages earned by a workman for a working day of 8 hours under Halsey and Rowan plan: Standard production per hour 20 units Actual production per day 200 units Wages rate per hour `30 In a factory bonus system, bonus shares are credited to the employee in the proportion of time taken which time saved bears to time allowed. Jobs are carried forward from one week to another. No overtime is worked. Payment is made in full for all units worked on, including those subsequently rejected. From the following information you are required to calculate for each employee: 1. The bonus hours and amount of bonus, 2. Total wages 3. The wage cost of each good unit produced. A B C Basic wage per hour `250 `400 `300 Units produced 2,500 2,200 3,600 Time allowed per 100 units 2 hrs 36 min 3 hrs 1 hr 30 min Time taken 52 hrs 75 hrs 48 hrs Rejected 100 units 40 units 400 units Calculate the earnings of a worker under (1) Halsey Plan and (2) Rowan Plan from the following particulars: 1. Hourly rate of wages guaranteed 0.50 per hour. 2. Standard time for producing one dozen articles-3 hrs 3. Actual time taken by the workers to produce 20 dozen articles 48 hours. The standard time of Job X is 100 hours. The job is completed by Amar in 60 hours, Akbar in 70 hours and Anthony in 95 hours. The bonus system applicable to the job is as follows:

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Percentage of time saved of time allowed Saving upto 10% From 11% to 20% From 21% to 40% From 41% to 100% The rate of pay is `1 per hour. Calculate the total earnings of earnings per hour.

Bonus 10% of time 15% of time 20% of time 25% of time each worker

saved saved saved saved and also the rate of

Q 8. An operator is engaged in machining certain components receives an ordinary day rate of `1.60 per day of 8 hours. The standard output for machining the component has been fixed at 80 pieces per hour (time as fixed for premium bonus). On a certain day, the output of the worker on this machine is 800 pieces. Find the labour cost per 100 pieces and the wages that would have been actually earned by the workman under the following: 1. If a bonus of `0.23 is paid per 100 pieces of the extra output. 2. If paid for on straight piece work basis at the standard rate. 3. IF Halsey plan is opted. Q 9. A, B and C were engaged on a group task for which a payment of `725 was to be made. As time basic wages are `8 per day, Bs `6 per day and Cs `5 per day. A worked for 25 days, B worked for 30 days and C worked for 40 days. Distribute the amount of `725 among the three workers. Q 10. A skilled workman in Alpha Ltd. is paid a guaranteed wage rate of `30 per hour. The standard time per unit for a particular product is 4 hours. P, 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 would have been his total earnings and effective hourly rate, had been put on Halsey Incentive Scheme (50%)? Q 11. A worker produced 200 units in a weeks time. The guaranteed weekly wage payment for 45 hours is `81. The expected time to produce one unit is 15 min which is raised further by 20% under the incentive scheme. What will be the earnings per hour of that worker under Halsey (50%) and Rowan incentive scheme? Q 12. The following information is made available by XYZ Ltd. for the year ending 31st Mar, 2008: Number of workers at the beginning of the year 8,000 Number of workers at the end of the year 9,600 Number of workers left the company during the year 500 Number of workers discharged during the year 100 Number of workers replaced due to left and discharges 700 Additional workers employed for expansion during the year 1,500 You are required to calculate labour turnover rate by using separation method, replacement method and flux method. Q 13. Bonus paid under the Halsey plan with bonus at 50% for the time saved equals the bonus paid under Rowan plan. When this statement hold good? Give your answer with proof. Q 14. In a factory the standard time allowed for completing a given task (50 units), is 8 hours. The guaranteed time wages are `20 per hour. If a task is completed in less than the standard time the high rate of `4 per unit is payable. Calculate the wages of worker, under the Gantt system, if he completes the task in (i) 10 hours, (ii) 8 hours, (iii) 6 hours. Also ascertain the comparative rate of earnings per hour under the three situations. Q 15. Mr. A is working by employing 10 skilled workers. He is considering the introduction of some incentive either Halsey scheme (50%) 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 worker. As a result of his assurance, the increase in productivity has been observed as revealed by the following figures for the current month:

Hourly rate of wages (guaranteed) `2 Average time for producing one piece by one worker at the previous performance 2 hours (This may be taken as time allowed) No. of working days in a month 25 No. of working hours per day for each worker 8 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 above schemes. 3. Advise Mr. A about the selection of the scheme to fulfill his assurance. Q 16. Using Merricks differential piece rate system, find the earnings of the Amar, Akbar and Anthony for the following particulars: Standard time per piece : 20 minutes Normal rate per hour : `9.00 In a 8 hour day Amar produced : 23 units Akbar produced : 24 units Ali produced : 30 units Q 17. A job can be executed either through workman A or B. A takes 32 hours to complete the job while B finishes it in 30 hours. The standard time to finish the job is 40 hours. The hourly wage rate is same for both the workers. In addition workman A is entitled to receive bonus according to the Halsey plan (50%), while B is paid bonus as per Rowan plan. The works overheads are absorbed on the job at `7.50 per labour hour worked. The factory cost of the job comes to `2,600 irrespective of the workman engaged. Find out the hourly wage rate and the cost of raw materials input. Also show the cost against each element of cost included in factory cost. Q 18. Management of a manufacturing unit is considering extensive modernization of the factory through progressive mechanization which would result in improved productivity. Workers would be paid 50% of the improved productivity as incentive wages. It was also agreed that through voluntary retirement the staff strength would be reduced to 300 for the present level of 400. The following further comparative data are available before and after proposed mechanization. Before Mechanization After Mechanization No. of articles produced per month 50,000 48,000 Fringe benefits 50% of wages Wages paid per month `4,00,000 Sales value per month `24,00,000 P/V ratio 25% Based on the above data, you are required to work out the annual financial implications of the proposal.