Labor Costing | Practical Questions With Answers

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on October 7, 2021

Question 1

Consider the following information concerning the monthly remuneration of three workers:

  • Standard production per month per worker 1,000 units
  • Actual production during the month: A, 850 units; B, 750 units; and C, 950 units.
  • Piece work rate is $0.10 per unit (actual production)
  • Additional production bonus is $10 for each percentage of actual production that exceeds 80% over standard
  • Dearness pay fixed at $50 per month

Required: Calculate the total monthly remuneration for three workers: A, B ,and C.

Solution

Total Monthly Remuneration for Workers

Monthly Worker Remuneration Problem 1 Solution

Question 2

Production sections of a factory working on a job order system pay their workers under the Rown Premium Bonus Scheme. Workers are also entitled to a dearness allowance of $25 per week of 48 hours.

A worker’s basic wage is $4 per day (8 hours), and the timesheet for a week is summarized below.

Job No. Time Allowed Time Taken
1 25 hours 20 hours
2 30 hours 20 hours

Idle time (waiting) 8 hours.

Required: Calculate the gross wages that a worker earns for the week.

Solution

Job No. 1 Job No. 2
Time Allowed 25 hrs. 30 hrs.
Time Taken 20 hrs. 20 hrs.
Time Saved 05 hrs. 10 hrs.

Bonus Hours (Rowan Plan)
Bonus Hours Calculation (Rowan Plan)
Labour Costing Calculations Problem 2
Gross Earnings

Job No. 1 $22.00
Job No. 2 $23.33
Idle time wages (8 x .50) $4.00
Dearness allowance for idle time (8 x 0.50) $4.00
Total wages $53.33

Calculation
Calculations Problem 2

Question 3

An operator engaged in machining components receives an ordinary day rate of $160 per day for an 8-hour day.

The standard output for machining the components has been fixed at $0.80 per hour (time fixed for premium bonus). On a certain day, the worker’s output on the machine is 800.

Required: Find the labor cost per 100 pieces and the wages earned under the following conditions:

  1. If a bonus of $19 is paid per 100 extra output
  2. If paid for on straight piece work basis at the standard rate
  3. If Halsey Premium Bonus System is in use

Solution

1. Bonus of $19 is paid per 100 extra output

Standard output per hour = 80 pieces
Standard output per day or for 8 hours  = 80 x 8  = 640 pieces
Actual output in 8 hours or in a day  = 800 pieces
Extra output  = 800 – 640  = 160 pieces

Bonus

For 100 extra output, bonus is  = $19.00
For 1 extra output, bonus is  = $19.100
For 160 extra output, bonus is  = (19 / 100) x 160  = $30.40
Regular wages for 8 hours  = $160.00
+ Bonus = $30.40
Total wages  = $190.40

Per 100 Piece Wages

For 800 pieces wages  = $190.40
For 1 piece wages  = $190.40/800
For 100 pieces wages  = (190.40 / 800) x 100 = $23.80

2. Straight Piece of Rate

Per piece wages  = 160 / 640 = $0.25
For 800 pieces wages  = 800 x 0.25  = $200
Per 100 pieces wages  = (200 / 800) x 100  = $25

3. Halsey Premium Bonus System

Standard time for 640 pieces = 8 hrs.
Standard time for 1 piece = 8 / 640 hrs.
Standard time for 800 pieces = (8 x 800) / 640 = 10 hrs.
Time taken = 8 hrs.
Time saved or bonus hours = 10 – 8 = 2 hrs.

Formula for Halsey Premium Scheme

50% of time saved = 2 x (50 / 100) = 1 hour
Regular wages = $160.00
Bonus = (1 x 160) / 8 = $20.00
Total earnings = 160 + 20 = $180.00
Per 100 piece earnings = (180 / 800) x 100 = $22.50

Question 4

The time and motion study department of Moonlight Corporation has informed you that standard production on a specific item is 40 units per hour. During the last week of December, a worker’s record shows the following for each 8-hour day:

Monday 280 units
Tuesday 300 units
Wednesday 320 units
Thursday Factory closed
Friday 360 units
Saturday 400 units

Required: Prepare a schedule showing the worker’s daily earnings, the effective hourly rate, and the labor cost per unit under the following conditions:

  1. Company uses the Halsey Premium Plan with a guaranteed rate of $1.00 per hour and a premium of 50% of the time saved on production in excess of standard.
  2. Company uses Tailor’s Differential Piece Rate System with rates as follows: for standard production and above, 4 cents per unit; and below standard production, 3 cents per unit.
  3. Company uses 100% Bonus Plan and the base wage is $1.50 per hour.

Solution

1.
Earnings Under Halsey Premium Plan
2.
Earnings Under Tailor's Differential Piece Rate System
3.
Earnings Under 100% Bonus Plan

2 thoughts on “Labor Costing | Practical Questions With Answers”

  1. A Co. uses 100% Bonus plan with a wage rate of Rs.20 per hour and the standard production is 40 units per hour. Bonus will be given for the time saved. Following is the data of Mr. X: Units produced Monday 360 Tuesday 400 Wednesday 350 Required: Determine Mr. X’s total earning, the time saved, daily earnings and the labor cost per unit.

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