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Unit - 4 Labour accounting - Meaning, Methods of Remuneration, Incentive Plans, Non-monetary incentives Control systems and procedures - Treatment

of Idle time, Leave with pay, Holiday with pay, Profit sharing Bonus

Labour Turnover: (1). Separation Method = Workers left + Discharged / Average No. x 100 (2). Replacement Method = Workers replaced / Average No. x 100 (3). Flux Rate = Separations + Accessions / Average No. x 100 -------------------------------------------------------------------------------------------------------------------------------1. From the following data given by the personnel department, calculate the Labour Turnover rate by applying: (a). Separation Method; (b). Replacement Method and (c). Flux Method No. of Workers on the payroll: At the beginning of the Year 900; At the end of the year 1100 During the month, 10 workers left, 40 persons were discharged and 150 workers were recruited. Of these, 25 workers are recruited in the several of those leaving, while the rest were engaged for an expansion scheme. 2. X Ltd provides the following information: No. of employees on 1.1.2011 No. of employees on 31.12.2011 No. of employees resigned No. of employees discharged No. of employees replaced Calculate Labour Turnover rate. - 5,000 - 6,000 - 500 - 130 - 450

3. From the following information, calculate labour turnover rate: No. of Workers as on 01.01.2000 = 7,600

DIRECT Direct expenses, Pricing of AND Over INDIRECT heads indirect - Allocation, EXPENSES expenses Apportionment, - Material cost, Absorption Labour Cost (T1: and 9.37 Overheads to 9.50) (T2: 1.23 to 1.26)

No. of Workers as on 31.12.2000

= 8,400

During the year, 80 workers left while 320 workers were discharged, 1500 workers were recruited during the year of which 300 workers were recruited because of exits and the rest were recruited in accordance with expansion plans.

Methods of Remuneration Time and Piece Rate


1. In a manufacturing organization worker X and worker Y produced 80 units and 92 units respectively within the 8 hours and 9 hours in a day. Time Rate Rs.20 per hour and Piece Rate Rs. 3 per unit. Calculate their Time Rate Wages and Piece Rate Wages. 2. Worker A has produced 500 units in 40 hours and Worker B has produced 450 units 42 hours. Time rate per hour is Rs.5 and Piece rate per unit is Re.0.50. Calculate Time Rate and Piece Rate Earnings of Worker A and Worker B.

Halsey and Rowan Bonus Plan


1. Standard Time (or Allowed Time) = 50 hours Wage rate per hour = Rs.3 Actual time taken = 42 hours Calculate Earnings under Halsey and Rowan Plan 2. From the following, calculate earnings of the worker under: (i) Halsey Plan and (ii) Rowan Plan Standard Time = 10 hours Hourly rate = Rs.2 Time Taken = 6 hours 3. The standard time allowed for a job is 50 hours. The hourly rate of wages is Rs.4.25 per hour worked. The actual time taken by the worker is 40 hours. Calculate the total earnings per hour worked under (i) Halsey Plan and (ii) Rowan Plan. 4. Calculate the earnings of a worker under (i) Halsey Plan and (ii) Rowan Plan from the following particulars

(a). Hourly rate of wages guaranteed Re.0.50 paise per hour (b). Standard time for producing one dozen articles 3 hours (c). Actual time taken by the worker to produce 20 dozen articles 48 hours 5. Compute the earnings of a worker under the: (a). Time Rate Method; (b). Piece Rate Method; (c). Halsey Plan and (d). Rowan Plan Information given: Wage rate - Rs.5 per hour Dearness Allowance Re.1 per hour Standard hours 80 hours Actual Hours 50 hours 6. Standard time allowed for a job is 50 hours. The hourly rate of wage is Rs.10 per hour plus a dearness allowance of Rs.5 per hour worked. The actual time taken by the worker was 40 hours. Calculate total wages on: (a). Time Basis; (b). Piece Basis; (c). Halsey Plan; (d). Rowan Plan. Time Basis: Basic 40 x 10 DA 40 x 5 Total Earnings Piece Basis: Basic 50 x 10 DA 40 x 5 Total Earnings = Rs.400 = Rs.200 = Rs. 600; Earnings per hour = 600/40 = Rs.15 per hour = Rs.500 = Rs.200 = Rs.700; Earnings per hour = 700/40 = Rs.17.50 per hour = Rs.400 = Rs. 50 = Rs.200 = 650; Earnings per hour= 650/40 = Rs.16.25 per hour = Rs.400 = Rs. 80 = Rs. 200 = Rs.680; Earnings per hour = 680/40 = Rs.17 per hour

Halsey Plan Basic- 40 x 10 Bonus (50 % of 10 hours x Rs.10) DA Total Earnings Rowan Plan Basic Bonus(10/50 x 40 hrs x Rs.10) DA Total Earnings

Differential Piece Rate System: (a). Taylors Differential Piece Rate System: 1. Calculate Earnings of Worker X and Worker Y with the help of Taylor piece rate system. Standard Production = 8 units per hours Working hours per day = 8 hours Lower rate = Rs. 5 per unit Higher rate = Rs.8.75 per unit Worker X Produces = 7 units per hour Worker Y Produces = 9 units per hour 2. On the basis of the following information, calculate the earnings of X and Y under the Straight Piece Rate System and Taylors Differential Piece Rate System: Standard Production = 10 units per hour Normal time rate = Rs.5 per hour Differential Piece rate to be applied: 80 % of piece rate for below standard performance 120 % of piece rate for performance at or above the standard. Actual Performance: X produced 80 units in a day of 10 hours Y produced 110 units in a day of 10 hours. Ans: 1 unit = Rs.5 / 10 units = 0.50 Low piece rate = 0.50 x 0.80 = 0.40 High piece rate = 0.50 x 1.20 = 0.60 3. Calculate the earnings of workers A & B under (a) Straight piece rate system and (b) Taylors differential piece rate system from the following particulars: Normal rate per hour Standard Time per unit = Rs.2.40 = 30 seconds

Differential Piece rate to be applied: 80 % of piece rate for below standard performance 120 % of piece rate for above standard performance Worker A produces 800 units per day and B produces 1,000 units per day. 4. On the basis of the following information calculate the earnings of A and B on the Straight price rate basis and Taylors differential piece rate system.

Standard Production Normal time rate

- 8 units per hour - Rs. 0.40 per hour

Differential to be applied:80% of piece rate below standard 120% of piece rate at or above standard. In a 9 hour day, A produces 54 units and B products 75 units.

Merrick Differential Piece Rate System: 1. On the basis of the following information calculate the earnings of A,B,C and D under Merrick Differential Piece Rate System: Standard Production per hour Normal rate per unit In an 8 hour day: A produced B produced C produced D produced Ans: Standard Production per hour Standard production per day of 8 hours ( 8 hours x 12 units) Actual Efficiency Piece Rate Applicable Total Earnings A 12 Units 96 units 64 64/96 = 66.7% Normal 0.60 64 x 0.60 38.4 B 12 Units 96 units 96 96/96 = 100% 110% 0.66 96 x 0.66 63.36 C 12 Units 96 units 84 84/96 = 87.5% 110 % 0.66 84 x 0.66 55.44 D 12 Units 96 units 100 100/96 = 104.2 120% 0.72 100 x 0.72 72.00 - 12 units - Re.0.60 - 64 units - 96 units - 84 units - 100 units

2. Standard output - 150 units per day of 8 hours Piece rate - Re.0.20 per unit Output of A 100 units, B 135 units and C-180 units Calculate the earnings of A,B and C workers under Merricks differential piece rate system. 3. Calculate the earnings of workers A,B and C under Straight Piece rate system and Merricks differential piece rate system from the following particulars:

Normal rate per hour - Rs.5.40 Standard time per unit - 1 minute (i.e., 60 units per hour) Working hours per day - 8 hours Output per day is as follows: A 390 units; B 450 units; and C- 600 units Hint: Wage rate per unit = Rs.5.40/60 units = 0.09 Standard output per day of 8 hours = 60 units x 8 hours = 480 units

Labour Cost It includes the following items of expenditure incurred on workers by the employer. a) Monetary benefits : It includes basic wages dearness allowance, employers contribution to provident fund and E.S.I. Scheme, production bonus, profit bonus, pension, retirement gratuity. b) Fringe benefits : It includes subsidized food and housing to the workers, subsidized education to their children, medical facilities, holidays, pay and recreational facilities. Types of labour Direct labour : It is the labour directly engaged in the production of goods. It can be easily allocated to a particular job, product or process. The cost of this labour forms part of prime cost. Indirect Labour : It is the labour which indirectly helps the direct labour engaged in production. Its cost cannot easily be allocated or identified. The cost of this labour will be included in the overhead. E.g., supervisors, storekeeper, watchmen etc. Methods of labour remuneration Time rate system Under this system, wages are fixed and paid to the workers on the basis of time which may be hourly, daily, weekly or monthly. (Wages = Time Taken x Time rate). This may be applied under the following methods : 1) Time rates at ordinary levels : Under this system, wages are paid at a rate on the basis of time irrespective of the work done by the worker. 2) Time rate at high levels : under this system, a time rate which is higher than the rate prevailing in that area or industry is adopted to provide an incentive to the workers.

3) Graduated time rate : Under this method the wages rate may vary according to the changes in the cost of living index.