4 LABOUR - CA Study Web

Page 1V’Smart Academy ( 88883 88886)41.Chapter 4 :LabourLABOURWAGE SYSTEMTime basis system : Earning Hours worked * Rate per hourPiece basis system : Earning Units produced * Piece rate𝐑𝐚𝐭𝐞 𝐩𝐞𝐫 𝐡𝐨𝐮𝐫Here, Piece rate rate per unit 𝐒𝐭𝐚𝐧𝐝𝐚𝐫𝐝 𝐨𝐫 𝐧𝐨𝐫𝐦𝐚𝐥 𝐮𝐧𝐢𝐭𝐬 𝐩𝐞𝐫 𝐡𝐨𝐮𝐫Costing by Raj Awate – Amazing journey of Concept and logic4.1

Page 2V’Smart Academy ( 88883 88886)2.Chapter 4 :LabourPIECE BASIS PLANTaylor’s differential piece rate system :Piece rate payableEfficiencyBelow standard ( 100% )83% of normal piece rateAt & above standard125% of normal piece rateMerrick’s differential piece rate system :Piece rate payableEfficiency3.Upto 83%normal piece rate83 % to 100%110% of normal piece rateAbove 100%120% of normal piece rateTIME BASIS PLANEmersion’s efficiency plan:EfficiencyWage rate payableUpto 66.66%Normal times wages66.66% to 100%Normal time wages bonus from 0-20%Above 100%Normal time wages 20% bonus 1%extra bonus for every 1% efficiency above100%Barth’s variable sharing plan :Earning rate per hour * Actual hours * standard hoursBedaux point system :Costing by Raj Awate – Amazing journey of Concept and logic4.2

Page 3V’Smart Academy ( 88883 88886)4.3Chapter 4 :LabourEarning Hours worked * Rate per hour 75% ofBedaux points saved * rate per hour60Halsey plan :Earning Hours worked * rate per hour 50% ( time saved * Rate per hr)Rowan plan :Time takenEarning Hours worked * rate per hour Time allowed* ( time saved * Rate per hour)When TT TS : Earning under Halsey Earning under rowanLABOUR TURNOVERCauses of Labour Turnover :Personal causes : Death Family problems Retirement No liking for jobAvoidable causes : Poor wages Odd hours of work Bad working conditions Lackof incentives and promotions Lack of transport, house, medical facilitiesEffects of Labour Turnover :Cost of selecting/replacing workers Cost of training imparted to new workers Lossdue to defectives and wastageMeasurement of Labour TurnoverCosting by Raj Awate – Amazing journey of Concept and logic

Page 4V’Smart Academy ( 88883 88886)4.4Chapter 4 :LabourNumber of Separationduringagivenperioda) Separation Rate Method Averagenumberofworkersduringtheperiod * 100b) Replacement method NumberofreplacementsduringagivenperiodAverage number of workersduringtheperiodx100c) Flux method [No. of separation during a period] [No. of new employees during a given period]x100(Avg no. of workforce during the given period)4.TREATMENT OF OVERTIME PREMIUMtreatment of overtime premium will be as follows:1. If the overtime is resorted to at the desire of the customer, then the entire amountof overtime including overtime premium should be charged to the job directly2. If it is due to a general pressure of work to increase the output, the premium aswell as overtime wages may be charged to general overheads.3. If it is due to the negligence or delay of workers of a particular department, it maybe charged to the concerned department.4. If it is due to circumstances beyond control, it may be charged to Costing Profit& Loss AccountCosting by Raj Awate – Amazing journey of Concept and logic

Page 5V’Smart Academy ( 88883 88886)Chapter 4 :Labour4.5QUESTION 1.Using Taylor’s and merricksdifferential piece rate system, find the earning of Anderson fromthe followingparticulars:Standard time per piece12 minutesNormal rate per hour 20In a 8 hours day, Anderson produced37 UnitsSolution:Standard output per day () Actual Output Taylor plan :Efficiency (%) Applicable piece rate Earning of Anderson Merrick’s plan :Efficiency (%) Applicable piece rate Earning of Anderson Costing by Raj Awate – Amazing journey of Concept and logic

Page 6V’Smart Academy ( 88883 88886)Chapter 4 :Labour4.6QUESTION 2.Standard output in 10 hours is 240 units; actual output in 10 hours is 264 units. Wages rate is 10 per hour. Calculate total wages under Emerson efficiency Plan.Solution:Efficiency (%) Total Wages QUESTION 3.You are given the following information of a worker:(i) Name of worker:Mr. Roger(ii) Ticket No.:002(iii) Work started:1-4-14 at 8 a.m.(iv) Work finished:5-4-14 at 12 noon(v) Work allotted:Production of 2,160 units(vi) Work done and approved:2,000 units(vii) Time and units allowed:40 units per hour(viii) Wage rate: 25 per hour(ix) Mr. Roger worked 9 hours a day.You are required to calculate the remuneration of Mr. Roger on the following basis:(i) Halsey plan and(ii) Rowan planSolution:Time allowed Time Taken Time saved Costing by Raj Awate – Amazing journey of Concept and logic

Page 7V’Smart Academy ( 88883 88886)4.7Chapter 4 :LabourRate per hour (i) Calculation of Remuneration under Halsey Plan:Total remuneration (ii) Calculation of Remuneration under Rowan Plan:Total remuneration QUESTION 4.Two workmen, Andrew and Baker, produce the same product using the same material.Andrew is paid bonus according to Halsey plan, while Baker is paid bonus according to Rowanplan. The time allowed to manufacture the product is 100 hours. Andrew has taken 60 hoursand Baker has taken 80 hours to complete the product. The normal hourly rate of wages ofworkman Andrew is 24 per hour. The total earnings of both the workers are same. Calculatenormal hourly rate of wages of workman Baker.Solution:AndrewBakerTime allowed (Hours)Time taken (Hours)Time Saved (Hours)Rate per hourTotal earningsCosting by Raj Awate – Amazing journey of Concept and logic

Page 8V’Smart Academy ( 88883 88886)According to the problem,Total earning of Andrew Chapter 4 :LabourTotal earnings of Baker Therefore, Hourly rate of wages of Baker isQUESTION 5.Standard Time for a job is 90 hours. The hourly rate of guaranteed wages is 50. Because ofthe saving in time a worker A gets an effective hourly rate of wages of 60 under Rowanpremium bonus system. For the same saving in time, calculate the hourly rate of wages aworker B will get under Halsey premium bonus system assuring 40% to worker.Solution :Costing by Raj Awate – Amazing journey of Concept and logic4.8

Page 9V’Smart Academy ( 88883 88886)Chapter 4 :LabourQUESTION 6.From the following information, calculate Labour turnover rate and Labour flux rate:No. of workers as on 01.01.2013 7,600No. of workers as on 31.12.2013 8,400During the year, 80 workers left while 320 workers were discharged 1,500 workers wererecruited during the year of these, 300 workers were recruited because of exits and the restwere recruited in accordance with expansion plans.Solution:Labour turnover rate:It comprises of computation of labour turnover by using following methods:(i) Separation Method: 100Average number of workers (ii)Replacement Method:No.of workers replaced Average number of workers 100 Flux Method : Average number of wor ker s 100 Costing by Raj Awate – Amazing journey of Concept and logic4.9

Page 10V’Smart Academy ( 88883 88886)Chapter 4 :Labour4.10 QUESTION 7.Accountant of your company had computed labour turnover rates for the quarter ended 30thSeptember, 2013 as 14%, 8% and 6% under Flux method, Replacement method andSeparation method respectively. If the number of workers replaced during 2nd quarter of thefinancial year 2013-14 is 36, find the following:(i) The number of workers recruited and joined; and(ii) The number of workers left and discharged.Solution:Labour Turnover Rate (Replacement method) No.of wor ker s replacedAverage No.of wor ker s Labour Turnover Rate (Separation Method) No.of workers SeparatedAverage no of workers )Labour Turnover Rate (Flux Method) Average No.of workers (i) The No. of workers recruited and Joined (ii) The No. of workers left and discharged QUESTION 8.A Company is undecided as to what kind of wage scheme should be introduced. The followingparticulars have been compiled in respect of three systems, which are under consideration ofthe management.WorkersABCCosting by Raj Awate – Amazing journey of Concept and logic

Page 11V’Smart Academy ( 88883 88886)Actual hours worked4.11Chapter 4 :Labour384034 6 5 7.20Product- P21-60Product- Q36-135Product –R4625-PQR121830in a weekHourly rate of wagesProduction in unitsStandard time allowed per unit of each product is:MinutesFor the purpose of piece rate, each minute is valued at 0.10You are required to calculate the wages of each worker under:(i) Guaranteed hourly rates basis(ii) Piece work earnings basis, but guaranteed at 75% of basic pay (guaranteed hourly rate)if his earnings are less than 50% of basic pay.(iii) Premium bonus basis where the worker receives bonus based on Rowan scheme.Solution:(i)Computation of wages of each worker under guaranteed hourly rate basisWorkersActual hoursHourly rate ofWages(a)worked in a weekwages ( )( )(b)(c)(d) (b) (c)ABCCosting by Raj Awate – Amazing journey of Concept and logic

Page 12V’Smart Academy ( 88883 88886)(ii)Product(a)4.12Chapter 4 :LabourComputation of wages of each worker under piece work earnings basisWorker AWorker BWorker CRate Per UnitsWagesUnit( )(b)(c)(d b*c)UnitsWagesUnits( )(e)(f b*e)( )(g)PQRWorking Notes:1. Piece rate / per unitProductRate per hourStandard units per Piece ratehr(a)(b)( )(c)PQR2. Time allowed to each workerWorker A WagesCosting by Raj Awate – Amazing journey of Concept and logic(h b*g)

Page 13V’Smart Academy ( 88883 88886)Chapter 4 :LabourWorker B Worker C (iii) Computation of wages of each worker under Premium bonus basis (where eachworker receives bonus based on Rowan Scheme)Workers TimeTimeTimeWageEarningsallowedtakensavedrate/hour ( )hourshourshours( )ABCCosting by Raj Awate – Amazing journey of Concept and logic4.13

Page 14V’Smart Academy ( 88883 88886)4.14Chapter 4 :LabourQUESTION 9.The standard hours of job X is 100 hours. The job has been 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:Percentage of time saved to time allowed (Slab rate) BonusSaving upto 10%10% of time savedFrom 11% to 20%15% of time savedFrom 21% to 40%20% of time savedFrom 41% to 100%25% of time savedThe rate of pay is 1 per hour, Calculate the total earnings of each worker and also the rateof earnings per hour.Solution:Statement of total earnings and rate of earning per hourWorkersAmarAkbarTime allowedTime takenTime savedRate per hourPercentage of time saved to timeallowedBonusTotal earningRate of earning per hrCosting by Raj Awate – Amazing journey of Concept and logicAnthony

Below standard ( 100% ) 83% of normal piece rate At & above standard 125% of normal piece rate Merrick’s differential piece rate system : Efficiency Piece rate payable Upto 83% normal piece rate 83 % to 100% 110% of normal piece rate Above 100% 120% of normal piece rate 3. TIME BASIS PLAN Emersion’s efficiency plan: Efficiency Wage rate .