Labour :Time Rate -piece rate, Incentives meaning importance Taylor Differential piece rate-Halsey & rowan plans.Labour turnover meaning causes -effects-methods

1. Cost and Management Accounting
Unit 2
Prepared by
Jissy.C
Assistant Professor
Department of commerce(IB)

2. LABOUR COST
Labour cost is one of the factors of production. It
represents the human contribution to production.
• Classification of labour cost
Direct labour cost
Indirect labour cost
• Labour cost control
Personal Department
Time recording Dept
Pay roll Dept
Engineering Dept
Cost Accounting Dept

3. TIME KEEPING AND TIME BOOKING
Time keeping
Time Keeping involves recording the arrival &Departure
time of employees in factory. It records the incoming
&outgoing time of employees in a factory
Methods of Time keeping
• Manual Methods:
Attendance Register
Token method
• Mechanical Methods:
Dial Time recorder
Card Time Recorder
Autograph or Signature type time recorder
TIME BOOKING
It Denotes the process of recording the time spent by each worker on
various jobs in a factory .It involves the recording of the starting
time & finishing time of employees on a job

4. Methods of Time Booking
• Daily Time Sheet
• Weekly Time sheet
• Job card
• Combined time &job Card
• Labour cost card
• Piece work Card
MOTION AND TIME STUDIES
Motion study consists of dividing the work into
the most fundamental elements separately and
in relation to one another : and from those
studied elements when times,building methods
of least waste.

5. TIME STUDY
Time study is a defined as observing, recording,
&analyzing the time required to perform each detailed
element of an operation
JOB EVALUTION
It represents an effort to determine the relative value of
every job in a plan & to determine what the fair wage for
such a job should be
Steps in a job evaluation Programme
Step:1 Selection of the factors common to all jobs:-Skills,
Efforts, Responsibilities, Job Conditions
Step :2Clear cut definition of the factors
Step:3 Selection of a suitable rating method:- Ranking
method, Job Classification ,Point Method, Factor
comparison method

6. PERFORMANCE APPRASIAL or MERIT RATING
A systematic, period & so far as humanly possible
,an impartial rating of an employee excellence in
matters pertaining to his present job & to his
potentialities for a better job
Methods of Merit Rating.
1.Rating Scales
2.Employee Comparison System
3.Check Lists Rating System
4.Critical Incident Technique
5.Other methods

7. CASUAL WORKERS
Casual workers refer to those who are not on pay-
roll of the factory but are engaged casually where
there is extra load in the factory.
IDLE TIME
Idle time is that time for which payment made but
no direct production /benefit is obtained .The
question of idle time arises only when the
payment is made on the time basis
Idle Time=Time Recorded as per Time card-Time
Booked on job as per job card.

9. • Calculation of normal & Abnormal IDLE Time
Particulars Hours
Hours as per time 24
Less : Normal Idle time
[20 minutes /1 day X 6 Days] 2
EFFECTIVE NORMAL HOURS 22
Less: Hours booked to jobs 18
ABNORMAL IDLE TIME 4
Total Labour cost =24 hours X 20 per hour=480

10. • Statement showing the allocation of wages
Particulars Hours
To jobs(Cost of hours booked to jobs 18hrs X Rs 20) 360
To Factory O/H (Cost of normal Idle time (2Hrs X20) 40
To costing P/L (Cost of abnormal idle time 4 hrs X 20) 80
Total Wages(24 Hrs X Rs 20) 480

12. • Calculation of normal & Abnormal IDLE Time
Total wages payable to the worker for the week =42 hrs X1 =42
Workers Wages are to be dealt with in the cost accounts
as follows
Hours
Wages debited to job No 5(20X 1) 20
Wages debited to job No 5(10X 1) 10
Wages debited to job No 5(8 X1) 8
Wages approved absence for 6days @ 15 minutes per
day taken as normal idle time to be covered as factory
o/H (1/60 X 90) 1.50
Calculation of time saved :42 Hrs – (20+10+8+1.50 =2.5 hrs)
Wages for time wasted due to power failure taken as
abnormal loss transferred to costing P/L Account(2.5
hrs X 1) 2.50
TOTAL WAGES 42

13. • OVER TIME
• Over time refers to an extra time over & above the
normal working hours.
1.Calculate wages due to a worker from the following data
Normal hrs in a week 44 hrs
Actual Hrs booked 50 hrs
Rate per hour Normal rate 1.25 overtime 200% of normal data
Solution:
Direct wages (44 hrs X 1.25) =55
Overtime wages(50-44 = 6hrs X2.50) =15
Total wages =70

15. Statement showing Calculation of Normal Time & overtime for Option 1
Day Actul hrs
Worked
Normal
Hrs
Nromal
Wage @
Rs1 per
hrs
Over
@single
rate
Time hrs
@ Double
rate
Over
time
wages
Monday 8 8 8 - - -
Tuesday 9 8 8 1 - 1
Wednesay 10 8 8 1 1 3
Thursday 11 8 8 1 2 5
Friday 10 8 8 1 1 3
Saturday 8 8 8 - - -
Total 56 48 48 4 4 12

16. • Statement showing calculation of normal & OT wages for Option 2
• Normal wages (48 Hrs X Rs1) =48
• OT wages(56-48= 8 hrs X 2 hrs =16
• Total wages =64
• Option I Total Wages=(48+12)=60
• Option II Total wages=(48 +16)=64

19. Solution:
1)Separation rate Method=No of separations /Average no.of.workers X100
• =250+50/(1500+2500)/2 X100
• =300/2000 X100 = 15%
2)Replacement method = No.of.Replacement / Average no.of.workers X100
=200/2000 X100 = 10%
3)Flux Method=
(No.of sperations + No .of. Replacements)/ Average no.of.workers X 100
300+200/2000 X 100 = 25%

21. Solution:
1)Separation rate Method=No of separations /Average no.of.workers X100
• =5+20/(500+600)/2 X100
• =25/550X100 = 4.545%
2)Replacement method = No.of.Replacement / Average no.of.workers X100
=10/(500+600) /2 X100 = 1.82%
3)Flux Method=
(No.of sperations + No .of. Replacements)/ Average no.of.workers X 100
5 +20+75
(500+600)/2 X100 =100/550 X100 =18.18%

25. (f) Expenditure on amenities to labour Rs200 per head per mensem
(g)Number of working days in a month 25 days of 8 hrs each.

26. Statement showing the labour cost per man-day of 8 hrs
Particulars Amt per
month(25
days)
Rate per
man-day
of 8 hrs
f)Expenditure on amenities Rs 200 per head 200 8
a)Basic salary (25 @20) 500 20
e)Employer contribution to state insurance 2.5% of
2200
55 2.20
b)Dearness allowance(600 X2.50) 1500 60
c)Leave salary10% Rs(2000) 200 8
d)Employer contribution to PF 8% of 2200 176 7.04
Total labour cost 2631 105.24

28. Statement showing the labour cost per man-day of 8 hrs
Particulars Amt per
month(25
days)
f)Expenditure on amenities Rs1000/25 40
a)Basic salary 40
e)Employer contribution to ESI 2% of 176) 3.52
b)Dearness allowance5 X600)/25 120
c)Leave salary10% Rs(160) 16
d)Employer contribution to PF 8% of 176 14.08
Labour cost per man –days of 8 hours 233.60

29. • REMUERATION & INCENTIVE
Labourers are remunerated for the work done by them in a factory on certain
basis. The remuneration payable to them is known as wages

30. • Time rate system
• Under time rate system ,Labourers are paid for the time worked by them.
Here the quantum of production is not considered for wage payment
Formula, Wages= Actual time worked X Time rate
• Piece Rate System
• It is adopted where increased quantum of production is described.
• Wages= Number of units produced X Piece rate per unit

32. Solution
a) Calculation of wages on Time basis:
Time wages = No. of hrs worked X Rate per hour
= 8 hours X Rs 4 =Rs 32
b)Calculation of wages on Piece Basis:
Normal Rate per hour=4
Adjusted rate at 25% increase
ie at 125 % =4 X 125%=Rs 5
Piece rate=Rs 5/50units =Rs0.10/-
Piece rate= No.of.Units Produced X Rate Per Unit
=395 X 0.10 =39.50/-

33. • Taylor's Differential Piece Rate system
• It is based on the assumption that the degree of efficiency varies from worker to
worker & hence the workers must be paid according to their degree of efficiency.
• Features of Taylor Differential Piece rate system
Two Piece rates are fixed:
i)Lower rate ie,80% of normal piece rate for the worker who produces
below the standard output
Formula Wages at low Piece rate
=Actual output X (Normal Piece rate X 80%)
ii)Higher rate 120% of normal piece rate for the worker who produces
below the standard output or more than the standard
Formula wages at higher Piece rate
=Actual output X (Normal Piece rate X 120%)

35. • Calculation of level of performance of workers:
• Standard Production per 30 seconds = 1 units
• Standard production per minute=1/30 X 60=2 units
• Standard production per hour = 2 units per minute X 60 minutes=120
units
• Standard production per Day of 8 hours =120 units per hour X 8 hours
=960 units
• Worker A who Produced 1000 units per day is above standard
• Worker B who Produced 1000 units per day is above standard
• Calculation of Piece Rate:
• Standard Rate per hour =Rs2.40
• Standard Output per hour =120 units
• Straight Piece rate =2.40/120=Rs0.02

36. • Low piece rate below standard Production=Straight Piece rate X lower
Piece rate
=0.02 X 80% =Rs0.016
• High Piece rate for High Standard Production =Straight Piece rate X
Higher Piece rate
=0.02 X 120% =Rs0.024
• Calculation of earning of workers under Taylor Differential Piece Rate
System :
• Worker A who is above standard will get Rs 0.024 per unit & Worker B
who is Below Standard will get Rs 0.016 per unit ,Therefore their earning
would b as follows:
• Earnings= Production of worker X Differential Piece rate
• Worker A=1000 units X 0.024 = Rs24
• Worker B = 900 units X 0.016 =14.40

37. • Incentive System of Wage Payment
The term Incentive has been defined as “The stimulation of effort &
effectiveness by offering monetary Inducement.
HALSEY PLAN
In this system ,Standard time is decided on the basis of past experience and
the worker is paid the agreed rate per hour for the time spent thereon
plus a Fixed percentage (Normally 50%) of the time , he saved on the
standard.
Earnings =T X R +(50% of S) X R
Time =Time taken
R = Hourly Rate
S= Standard Time

38. • Calculate wages under Halsey System from the following particulars
Time Allowed -16 hours, Time Taken – 10 Hours , Time rate –Rs 2 Per hour
Solution
Earnings =T X R +(50% of S) X R
=10 X 2 +(50% X6*) X 2
=20 +6 = 26
*Calculation of time saved=Timed Allowed –Time taken
=16 hours- 10 hours= 6 hours

39. • ROWANPLAN
• Under this system bonus hours are calculated as a proportion of the time
taken ,which the time saved bears to the time allowed ,& they are paid on
the basis of the time rate system.
• Earnings under rowan plan system=Time Taken X Time Rate +(Time
saved /Standard Time X Time taken ) X Time Rate.(OR)
T X R +(s-T x T ) X R)
s
Q1.Using the following data, Calculate the wages payable to a workman
under the Rowan premium Bonus Plan: Time Allowed :-40 Hours, Time
Taken :- 32 Hours, Rate Per Hour :- Rs 5
• Solution
• =32 X 5 +(8/40 X32) X5
• =160 +32=192

40. Q2.Set out a Comparative statement showing the effect of paying wages on
1)Halsey Plan&2)Rowan Plan
Standard Time: 10 hours Hourly Wage Rate: Rs5
Time Taken:8 Hours Overhead rate per hour: Rs 6
Solution
Calculation of wages:
Halsey Plan
Wages under Halsey Plan = T X R +(50%X(s-T) X R)
=8 X 5 + (50% X(10-8) X 5)
=40 +50% X( 10-8) x 5
=40 + 5 =45
Rowan Plan
T X R +(s-T x T ) X R)
s
=8 X 5 + (10-8/10) X8 X 5
=40 +8
=48