Labor Costing | Practical Questions With Answers
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.
Total Monthly Remuneration for Workers
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.
|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)
|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|
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:
- If a bonus of $19 is paid per 100 extra output
- If paid for on straight piece work basis at the standard rate
- If Halsey Premium Bonus System is in use
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|
|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
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:
Required: Prepare a schedule showing the worker’s daily earnings, the effective hourly rate, and the labor cost per unit under the following conditions:
- 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.
- 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.
- Company uses 100% Bonus Plan and the base wage is $1.50 per hour.