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Labour Costing
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Illustration 3.1: An analysis of the time card of a worker on a machine shows that Calculate the gross weekly earnings of each workmen taking into consideration
of the total 48 hours, he worked 45 hours (including 4 hours overtime) on production that each
and that 3 hours as idle time due to machine breakdown. [Group Wages of A, B, C, D : Rs.30; Rs.45; Rs.45; Rs.30 = Rs.150
The rate of work is Re.1.00 hour; but overtime is paid 50% extra. You are required Personal Wages of A, B, C, D : Rs.2; Rs.3; Rs.14; Rs.24 = Rs.43
to allocate the total wages paid to the worker between “Direct and Indirect” labour, Dearness Allowance for A, B, C, D : Rs.20 each
indicating the reasons therefore. Total Wages of A, B, C, D : Rs.52; Rs.68; Rs.79; Rs.74 = Rs.273]
[Total Wages: Rs.50; Direct Wages for normal working time: Rs.45.00;
Indirect Wages for overtime allowance: Rs.0.50; Abnormal Idle time: Rs.4.50] Illustration 3.5: From the following calculate the amount of wages payable to ‘A’
for each of the two days of a week :
Illustration 3.2: The following information relates to the personnel department of Standard Rate per hour Rs.2.00
a factory for the month of April, 2000 : Standard Rate per piece Rs.3.00
Number of workers on April 1, 2000 950 Hours of work in a day 8 Hours
Number of workers on April 30, 2000 1,050 A produces 3 pieces on the first day. However, his production goes upto 6 pieces
Number of workers who quit the factory in April 10 on the second day.
Number of workers discharged in April 30 [Day1: Rs.16 with debt creation )of Rs.7; Day2: Rs.16 with remaining debt of Rs.5]
Number of workers engaged in April (including 120 on account of expansion scheme) 140
Calculate the labour turnover rate and equivalent annual rate under the different Illustration 3.6: A worker under the Halsey method of remuneration has a day
methods. rate of Rs.12 per week of 48 hours, plus a cost of living bonus of 10 paise per hour
[Separation Method: 48%; Replacement Method: 24%; Flux Method: 36% or 72%] worked. He is given an 8 hours task to perform, which the accomplishes in 6
hours. He is allowed 30% of the time saved as premium bonus. What would be
Illustration 3.3: From the following data, find out the Labour Turnover Rate by his total hourly rate of earnings, and what difference would it make if he was paid
applying : under the Rowan method ?
(i) Flux method; (ii) Replacement method; (iii) Separation method [Halsey Plan: Rs.2.25; Rowan Plan: Rs.2.47]
No. of workers on the payroll
At the beginning of the month 500 Illustration 3.7: Standard time for completion of a task is 20 hours and per hour
At the end of the month 600 rate is Re.1. In addition for every hour worked, there is a dearness allowance at
During the month, 5 workers left, 20 persons were discharged and 75 workers the rate of 30 paise. Time taken by a worker is 15 hours.Calculate his earnings
were recruited. Of these, 10 workers were recruited in the vacancies of, while the under (i) time wage system; (ii) Piece wage system, (iii) Halsey-plan, (iv) Rowan
rest were engaged for and expansion scheme. plan
[B. Com. (Pass) Delhi] [(i): 6.36% or 3.18%; (ii): 1.82%; (iii): 4.55%] [(i): Rs.19.50; (ii): Rs.24.50; (iii): Rs.22.00; (iv): Rs.23.25]

Illustration 3.4: In an assembly shop of a Motor Cycle Factory four workers A, B,
C and D work together as a team and are paid on group piece rate. They also
work individually on day rate jobs. In a 44 hour week the following hours have
been spent by A, B, C and D on group piece work viz — A-40 hours, B-40 hours,
C-30 hours and D-20 hous. The balance of the time has been booked by each
worker on day work jobs. Their hourly rates are given below :
A Re.0.50
B Re.0.75
C Re.1.00
D Re.1.00
The group piece rate is Re.1.00 per unit and the team has produced 150 units.
Illustration 3.8: In a factory, number of bonus hours has the same ratio to the
number of hours saved which is there of the time actually taken to the standard
time. If the standard time is 50 hours and the actual time taken is 40 hours,
calculate the bonus hours.
As per the above standard time, also state how many maximum bonus hours can
be earned ?
[Bonus hours = 8; Maximum possible bounus hours = 12.5]
[Hint: Company is following Rowan Plan]
Illustration 3.9: X Ltd. provides you the following information for its factory working
6 days in a week :
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(a) Hours as per Time Card 48 hours Illustration 3.13: In a unit, 10 men work as a group. When the production of the
(b) Hours booked to jobs as per Job Card 36 hours group exceeds the standard output of 200 pieces per hour, each man is paid an
(c) Daily allowance for lunch, personal needs and maintenance 40 hours incentive for the excess production in addition to his wages at hourly rates. The
(d) Wage Rate (Per Hour) Rs.20 incentive is at half the percentage, the excess production over standard bears to
(e) Time not booked was due to breakdown of machinery, power failure, waiting the standard production. Each man is paid an incentive at the rate of this
for jobs materials and tools. percentage of a wage rate of 2 per hour. There is no relation between the individual
[B.Com. (Pass), Delhi] [Total Wages: Rs.960; Direct Wages for Jobs: Rs.720 workman’s hourly rate and the bonus rate.
Indirect Wages for lunch etc: Rs.80; Abnormal Idle time: Rs.160] In a week, the hours worked are 500 and the total production is 1,20,000 pieces.
(a) Compute the total amount of bonus for the week
Illustration 3.10: In a factory bonus to workmen is paid according to the Rowan (b) Calculate the total earnings of two workers A and B of the group where:
system. The standard time for a job is 80 hours and the hourly rate of wages is (i) A worked 44 hours and his basic rate per hour was 2.20
Rs.2. The prime cost of a job performed by one worker is Rs.350 and that by (ii) B worked 48 hours and his basic rate per hour was 1.90
another is 337.50. The cost of materials in each case is Rs.200. [(a): Rs.100; (b): Rs.105.60 & Rs.100.80]
Calculate the hours of time taken by the workers to complete the job.
[1st worker = 60 Hours; 2nd worker = 50 Hours] Illustration 3.14: From the following particulars given below, prepare the labour
cost sheet per man day of 8 hours :
Illustration 3.11: Compute the total earnings and the rate earned per hour in (a) Basic salary : Rs.2 per day.
respect of three workers under Halsey and Rowan schemes. (Bonus under Halsey
(b) Dearness allowance (Monthly) : 25 Paise for every point over
Schemes is 50% of time saved).
100 Cost of Living Index for
Standard time 20 hours
working class.
Hourly rate of wages Rs.2.00
Current Cost of Living Index is
Actual time taken is (i)16 hours; (ii)10 hours; (iii) 8 hours
700 points.
[Halsey Plan for (i): Rs.36; (ii): Rs.30; (iii): Rs.28;
Rowan Plan for (i): Rs.38.40; (ii): Rs.30; (iii): Rs.25.60] (c) Leave salary : 10% of (a) and (b)
(d) Employer’s contribution to Provident Fund : 8% of (a), (b) and (c)
Illustration 3.12: Calculate the normal and overtime wages payable to a workman (e) Employer’s contribution to State Insurance: 2.5% of (a), (b) and (c)
from the following data :
(f) Expenditure on amenities to labour : Rs.20 per head per mensem
Days Hours Worked
Monday ... ... 8 Hours (g) Number of working days in a month : 25 days of 8 hours each.
Tuesday ... ... 10 Hours [Rs.10.52]
Wednesday ... ... 9 Hours
Thursday ... ... 11 Hours PRACTICAL PROBLEMS
Friday ... ... 9 Hours
Q-1: From the following data given by the Personnel Department calculate the
Saturday ... ... 4 Hours
labour turnover rate by applying :
Normal Working Hours ... ... 8 hours per day
(a) Separation Method, (b) Replacement Method, (c) Flux Method.
Normal Rate ... ... 50 paise per hours
No. of workers on the pay-roll :
Overtime Rate ... ... Upto 9 hours in a day at single rate and
At the beginning of the month : 900
over 9 hours in a day at double rate.
At the end of the month : 1,100
OR
During the month 10 workers left, 40 persons were discharged and 150 workers
Upto 48 hours at a single rate and over
were recruited. Of these, 25 workers are recruited in the vacancies of those
48 hours at a double rate,whichever is
leaving, while the rest were engaged for an expansion scheme.
more beneficial to the workman.
[Normal hours = 44; Single rate bonus hours = 4 [A 5%, B 2.5%, and C 7.5%]
Double rate bonus hours = 3; Total Wages : Rs.27]
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Q-2: A Worker takes 9 hours to complete a job on daily wages and 6 hours on a (e) Pro-rata expenditure on amenities to labour : Rs.17.95 per head per month
scheme of payment by results. His day rate is 75 paise an hour, the material cost (f) No. of working hours in a month : 200 Hours
of the product is Rs.4 and overheads are recovered at 150% of the total direct [Wages per month: Rs.250; Wages per day: Rs.10; Wages per hour: Rs.1.25]
wages. Calculate the factory cost of the product under :
(a) Piece Work Plan; (b) Rowan Plan; (c) Halsey Plan Q-7: Calculate the earnings of a worker under : (a) Rowan Premium Bonus
[(a) 20.875, (b) 19, (c) 18.05] System, (b) Halsey Weir Premium Bonus System (40% to worker), from the following
[Hint. Standard time 9 Hrs. Wages will be paid for standard time under piece wage particulars:
system] Hourly rate of wages (guaranteed) : Re.0.75
Standard time for producing 1 dozen articles : 3 hours
Q-3: During first week ofApril 2000, the workman Mr. Kalyan manufactured 300 Actual time taken by the worker to produce 20 dozen articles : 48 hours
articles. He receives wages for a guaranteed 48 hours week at the rate of Rs.4 [(a) Rs.43.20, (b) 39.60]
per hour. The estimated time to produce one article is 10 minutes and under
incentive scheme the time allowed is increased by 20%. Calculate his gross Q-8: There are two piece workers, Rakhal and Upendra, who are paid Rs.5 for
wages according to : (a) Piece work with a guaranteed weekly wage. each piece work executed which costs Rs.15 per piece in materials.
(b) Rowan premium bonus, and In a working day of 8 hours, Rakhal can complete 4 pieces and Upendra only 3.
(c) Halsey premium bonus 50% to workman. If the overhead charges be Rs.1.50 per hour show which of the two piece workers
[(a) Rs.240, (b) 230.40, (c)Rs.216] is more useful to the factor.
In what circumstances would it be justifiable to employ even the less efficient
Q-4: Production sections of a factory working on job-order system pay their worker?
workers under the Rowan Premium Bonus Scheme. Workers are also entitled to [Cost of Production per unit: Rakhal’s - Rs.23; Upendra’s - Rs.24]
a dearness allowance of Rs.24 per week of 48 hours. A worker’s basic wage is
Rs.4 per day of 8 hours and his time sheet for a week is summarised below : Q-9: Two fitters, a labourer, and a boy, undertake a work on piece-work basis for
Job No. Time allowed Time taken Rs.600. The time spent by each of them is 220 ordinary working hours and the
I 25 hours 20 hours rate of pay are : for the two fitters 75 paise each per hour, for labourer 25 paise per
II 30 hours 20 hours hour and the boy 25 paise per hour.
Idle time (waiting) - 8 hours Ascertain the amount of the piece-work premium and show the amount of it which
Calculate the gross wages he has earned for the week. each worker will receive when it is divided proportionately to the time wages paid
[Rs.5.33] and show in each case the percentage the premium bears to the wages payments
at ordinary rates.To the amount paid for working up add cost of materials Rs.1,200,
Q-5: From the undermentioned information, work out the total amount payable proportion of ‘oncost’ Rs.450, of selling expenses Rs.300, and for carriage charges
and the rate earned per hour, by three workmen under the Halsey Premium Rs.200, and give the total cost.
Bonus System; the Bonus being calculated at 50% of the time saved : To return the manufacturer 20% on the total cost at what price must he sell, and
Standard time for given operation : 10 Hours what will be the profit if profit at 20% is expected on the selling price ?
Hourly rate of wages : Re 1.00 [Selling price: Rs.3,300; Profit: Rs.687.50]
Actual time taken : A - 8 hours; B - 6 hours; C - 5 hours.
[Rate earned per hour: A-Rs.1.12, B-Rs.1.33, C-Rs.1.50] Q-10: The standard time taken to complete a product is 12 hours at 25 paise per
hour. Time wages are allowed to workers taking more than the time allowed. But
Q-6: From the following data, prepare a statement showing the cost per day of 8 workers who complete the job in standard time or less receive a straight piece-
hours, of engaging a particular type of labour : work rate plus 10% bonus i.e. 12 hours at the rate of 27.5 paise per hour.
(a) Monthly salary (basic plus dearness allowance) : Rs.200 Calculate the wages earned by A, B, C and D who complete the job in 15 hours,
(b) Leave salary-payable to the workman : 5 % of salary 12 hours, 10 hours and 8 hours respectively. What will be their effective hourly
(c) Employer’s contribution to Provident Fund : 8 % of salary [(a) and (b)] rate ? If the overhead rate chargeable to production is 50 paise per hour, what
(d) Employer’s contribution to State Insurance : 21/2 % of salary [(a) and (b)]
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will be the “cost of conversion” (labour and overhead) per piece produced by Q-14: Following particulars have been extracted from the books of Supreme
each worker? Engineers Ltd.
[Effectively Hourly Rate: A- 25 paise, B- 27.5 paise, C- 33 paise, D- 41.25 paise Time allowed for the job (Hours) : 15 15 15
Cost of Conversion: A- Rs.11.25, B- Rs.9.30, C- Rs.8.30, D- Rs.7.30] Time taken (Hours) : 15 12 9
Bonus ratio for Halsey plan is 50% and wages rate per hour is Rs.2.
Q-11: On the basis of the following information, calculate the earnings o fA, B, C (a) You are required to compute the quantum of wages under Halsey Scheme
and D under Merrick Differential Piece Rate-system: and Rowan Scheme.
Standard production per hour : 12 Units (b) Which of these schemes would you like to introduce in this company if the
Normal rate per piece : Re. 0.60 time taken to complete the job is likely to reduce to 6 hours after three months.
Actual time worked : 8 hours (c) An alternative method of payment by results by a straight piece work rate for
Actual production by A: 64 Units, B: 96 Units, C: 84 Units, D: 100 Units. completion of the job in 7 hours is feasible. Would you like to switch over to
[A: Rs.38.40; B: Rs.63.36; C: Rs.55.44; D: Rs.72.00] this method of payment given further that hourly rate would be reckoned at
Rs.1.50 for fixation of the piece rate ? Give reasons for your advice.
Q-12: A worker whose day work wages is 2.50 an hour received production [(a) Total wage: Halsey Plan- Rs.30, Rs.27, Rs.24; Rowan Plan- Rs.30, Rs.28.80,
bonus under the Rowan Scheme. He carried out the following work in a 48 hours Rs.25.20
week. (b) Total wage: Halsey Plan- Rs.21.00, Rowan Plan- Rs.19.20
Job 1 :
1,500 items at 4 hours per 1,000 (c) Total Wages under straight piece work: Rs.10.50]
Job 2 :
1,800 items at 3 hours per 1,000
Job 3 :
9,000 items at 6 hours per 1,000
Job 4 :
1,500 items for which no standard time was fixed and it was arranged that
the worker would be paid a bonus of 25%. Actual time on the job was 4
hours.
Job 5 : 2000 items at 8 hours per 1,000 each item was es timated to be half ••••••••••••••••••••••
finished.
Job No. 2 was carried on a machine running at 90% efficiency and an extra
allowance of 1/9 th of actual time was given to compensate the worker. 4 hours
were lost due to power cut. Calculate the Earnings of worker, clearly stating your
assumptions for the treatment given by your for hours lost due to power cut.
[Time allowed: 79 Hours; Time taken: 44 Hours; Earnings Rs.168.73
Worker has been given bonus for lost time due to power cut]

Q-13: In production unit, the daily wage rate guaranteed is Rs.1.87 and the
standard output fixed for the month is 1,000 units. This represents 100% efficiency.
The daily wage rate shows 2/3 of efficiency standard. Beyond this a graded scale
bonus in a fixed ratio to the increased output is admissible as follows :
Efficiency : Bonus
90% : 10%
100% : 20%
Further increase of 1% bonus for every 1% further rise of efficiency. Find out the
total earnings of Mr. Arun and Mr. Balu who have enjoyed only 4 days of leave in
a month of 30 days. Their output were : Arun 900 units and Balu 1,000 units.
[Rs.59.80; Rs.65.64]