Labour

1. Calculate the number of hours worked as overtime by the following workers in a week.
Ram

Shyam

Monday

Tuesday

Wednesday

4.5

Thursday

Friday

10

Saturday

46.5

50

Study Material Self Examination Q. N 12

2. It is seen from the job card for repair of the customers equipment that a total of 154 labour
hours have been put in as detailed below:
__________________________________________________________________________
Worker A paid at
Worker B paid at
Worker C paid at
Rs. 2 per day of
Rs. 1 per day of
Rs. 3 per day of
8 hours
8 hours
8 hours
__________________________________________________________________________
Monday
10-1/2 hours
8 hours
10-1/2 hours
Tuesday
8 hours
8 hours
8 hours
Wednesday
10-1/2 hours
8 hours
10-1/2 hours
Thursday
9-1/2 hours
8 hours
9-1/2 hours
Friday
10-1/2 hours
8 hours
10-1/2 hours
Saturday
8 hours
8 hours
__________________________________________________________________________
Total
49 hours
48 hours
57 hours
__________________________________________________________________________
In terms of an award in a labour conciliation, the workers are to be paid dearness allowance
on the basis of cost of living index figures relating to each month which works out @ 96 for
the relevant month. The dearness allowance is payable to all workers irrespective of wage
rate if they are present or are on leave with wages on all working days.
Sunday is a weekly holiday and each worker has to work for 8 hours on all week days and 4
hours on Saturday; the workers are however paid full wages for Saturday ( 8 hours for 4
hours worked)
Workers are paid overtime according to the Factories Act for hours worked in excess of
normal working hours on each day. Excluding holidays ( including 4 hours work to be put in
on Saturday) the total number of hours work out to 172 in the relevant month. The
companys contribution to Provident Fund and Employee State Insurance Premium are
absorbed into overheads.

Work out the wages payable to each worker.

Study material 2
3. X an employee of ABC Co. gets the following emoluments and benefits.
a. Basic pay

Rs. 1000 p.m

b. Dearness Allowance

Rs. 200 p.m

c. Bonus

20% of Salary and DA

d. Other allowances

Rs. 250 p.m

e. Employees contribution to P.F

10% of Salary and DA

X works for 2,400 hours per annum, out of which 400 hours are non productive and
treated as normal idle time. You are required to find out the effective hourly cost of the
employee.
Study Material 1
4. In a factory working six days in a week and eight hours each day, a worker is paid at the rate
of Rs. 100 per day basic plus DA @ 120% of the basic. He is allowed to take 30 minutes off
during his hours for meals-break and a 10 minutes recess for rest. During a week, his card
showed that his time was chargeable to :
Job X

15 hours

Job Y

12 hours

Job Z

13 hours

The time not booked was wasted while waiting for a job. In Cost Accounting, how would
you allocate the wages of the worker for the week?
Study Material 24
5. In a factory, the basic wage rate is Rs. 10 per hour and overtime rates are as follows:
Before and after normal working hours

175% of basic wage rate

Sundays and holidays

225% of basic wage rate

During the previous years, the following hours were worked:

Normal time

100,000 hours

Overtime before and after working hours

20,000 hours

Overtime on Sundays and holidays

5,000 hours
125,000 hours

The following hours have been worked on the job Z:

Normal

1,000 hours

Overtime before and after working hours

100 hours

Overtime on Sundays and holidays

25 hours
1,125 hours

You are required to calculate the labour cost chargeable to job Z and overhead in each of the
following instances:
a. where overtime is worked regularly throughout the year as a policy due to the labour
shortage.
b. Where overtime is worked irregularly to meet the requirements of the production.
c. Where overtime is worked at the request of the customer to expedite the job.
Study Material 3
6. Calculate the earnings of A and B from the following particulars for a month oand allocate
the labour cost to each job X, Y and Z:
A
i)Basic wages

Rs. 100

ii) Dearness Allowances

50%

160
50%

iii) Contribution to Provident Fund ( on basic wage)

8%

iv) Contribution to Employees State Insurance ( on basic wage)

2%

v) Overtime

8%
2%

10 hours

The normal working hours for the month are 200. Overtime is paid at double the total of
normal wages and dearness allowance. Employers contribution to State Insurance and
Provident fund are at equal rate to employees contribution. The two workers were
employed on jobs X, Y and Z in the following proportions:
Jobs
X

Worker A

40%

30%

30%

Worker B

50%

20%

30%

Overtime was done on job Y.

Cost compilation/ Study Material Q. N 23
7. The cost accountant of Y Ltd. has computed labour turnover rates for the quarter ended 31 st
March, 2008 as 10%, 5% and 3% respectively under Flux method, Replacement method
and Separation method. If the number of worker replaced during the quarter is 30, find out
the number of :
1) workers recruited and joined, and; 2) workers left and discharged.
Study Material Q. N 6
8. From the following information, calculate labour turnover rate and labour flux rate:
No. of workers as on 1.1.2008

7,600

No. of workers as on 31.12.2008

8,400

During the year, 80 workers left while 320 workers were discharged. 1500 were recruited
during the year, out of this, 300 workers were recruited because of exits and rest were
recruited in accordance with extension plans.
Cost Compilation Q. N 39

9. The management of Earth Ltd. were worried about their increasing labour turnover in the
factory and before analyzing the causes and taking remedial steps, they want to have an
ideal of the profit foregone as a result of labour turnover in the last year.
Last year sales amounted to Rs. 8,303,300 and P/V ratio was 20%. The total number of
actual hours worked by the Direct Labour force was 4.45 lakhs. As a result of the delay by
the Personnel Department in filling vacancies due to labour turnover, 100,000 potential
productive hours were lost. The actual direct labour hours included 30,000 hours
attributable to training new recruits, out of which half of the hours were unproductive.
The costs incurred consequent on labour turnover revealed, on analysing, the following:
Settlement cost due to leaving

Rs. 43,820

Recruitment cost

Rs. 26,740

Selection cost

Rs. 12,750

Training cost

Rs. 30,490

Assuming that the potential production lost as a consequence of labour turnover could have
been sold at prevailing prices, find the profit foregone last year on account of labour
turnover.
Study Material 5
10. Using Taylors Differential piece rate system, find the earnings of Amar, Akbar and Anthony
from the following particulars.
Standard time per piece

20 minutes

Normal rate per hour

Rs. 9.00

In a day of 8 hours
Amar produced

23 units

Akhar produced

24 units

Anthony

30 units

Study Material Q. N 7
11. In a factory the standard time allowed for completing a given task ( 50 units ) is 8 hours.
The guaranteed time wages are Rs. 20 per hour. If the task is completed in less than the
standard time, the high rate of Rs. 4 per unit is payable. Calculate the wages of a worker,
under the Gantt task and bonus system, if the worker completes the task in
(i) 10 hours
(ii) 8 hours; and
(iii) 6 hours
Also ascertain the comparative rate of earning per hour under three alternatives.
Study Material Q. N 8
12. From the following information you are required to calculate the bonus and earnings under
Emerson Efficiency System. The relevant information is as under:
Standard working hours

8 hours a day

Standard output per hour in units

Daily wage rate

Rs. 50

Actual output in units

Worker A

25 units

Worker B

40 units

Worker C

45 units

Study Material Q. N 9
13. Calculate the earning of workers from the following information under Bedeaux system:
Standard time for a product A 30 seconds plus relaxation allowance of 50%
Standard time for a product B 20 seconds plus relaxation allowance of 50%
During 8 hours a day
Actual output of the product for A

500 units

Actual output of the product for B

300 units

Wage rate

Rs. 10 per hour

Study Material Q. N 10
14. Wage negotiation are going on with the recognized Labour Union and the Management
wants you as a Cost Accountant of the company for formulate an incentive scheme with a
view to increase productivity.
The case of three typical workers Amar, Akbar and Anthony who produce respectively 180,
120 and 100 units of the company product in a normal day of 8 hours, is taken up for study.
Assuming that day wages would be guaranteed at 75 paisa per hour and the piece rate would
be based on a standard hourly output of 10 units. Calculate the earnings of each of the three
workers and the labour cost per 100 pieces under a) Day wages; b) Piece rate; c) Halsey
Scheme; and d) Rowan Scheme.
Also calculate under the above schemes the average cost of labour for the company to
produce 100 pieces.
Cost Compilation Q. N 24
15. Bonus paid under the Halsey Plan is equal to the bonus paid under Rowan Plan. When this
statement hold good? ( Your answer must contain the proof)
Study Material 14
16. A skilled worker in ABC Ltd. is paid a guaranteed wage rate of Rs. 30 per hour. The
standard time per unit for a particular product is 4 hours. P, a machine man , has been paid
wages under Rowan Incentive Plan and he had earned an effective hourly rate of Rs. 37.50
on the manufacture of that particular product.
What could have been his total earning and effective hourly rate, had he been put on Halsey
Incentive Sheme?
Study Material Q. N 19
17. Mr. A is working by employing 10 skilled workers. He is considering to introduce some
incentive scheme either Halsey or Rowan scheme of wage payment for increasing the labour
productivity to cope with the increased demand for the product by 25%. He feels that if the

proposed incentive scheme could bring about an average 20% increase over the present
earnings of the workers, it could act as sufficient incentive for them to produce more and he
has accordingly given this assurance to the workers.
As a result of the assurance, the increase in productivity has been observed as revealed by
the following figures for the current month:
Hourly rate of wages (guaranteed)

Rs. 2.00

Average time for producing 1 piece

by one worker at the previous performance

2 hours

( This may be taken as time allowed)

No. of working days in the month

25

No. of working hours per of each worker

Actual production during the month

1,250 units

Required:
1. Calculate effective rate of earnings per hour under Halsey Scheme and Rowan Scheme.
2. Calculate the savings to Mr. A in terms of direct labour cost per piece under the
schemes.
3. Advise Mr. A about the selection of the scheme to fulfil his assurance.
Study Material 15
18. The finishing shop of a company employs 60 direct workers. Each worker is paid Rs. 400 as
wages per week of 40 hours. When necessary, overtime is worked upto a maximum of 15
hours per week per worker at time rate plus one-half as premium. The current output on an
average is 6 units per man hour which may be regarded as standard output. If bonus scheme
is introduced, it is expected that the output will increase to 8 units per man hour. The
workers will, if necessary, continue to work overtime upto the specified limit although no
premium on incentive will be paid.
The company is considering introduction of either Halsey Scheme or Rowan Scheme of
Wage Incentive System. The budgeted weekly output is 19,200 units. The selling price is
Rs. 11 per unit and the direct material cost is Rs. 8 per unit. The variable overheads amount
to Rs. 0.50 per direct labour hour and the fixed overhead is Rs. 9,000 per week.
Prepare a statement to show the effect on the companys weekly profit of the proposal to
introduce (a) Halsey Scheme; (b) Rowan Scheme.
Cost Compilation 48
19. A job can be executed either through workman A or B. A takes 32 hours to complete the job
while B finishes it in 30 hours. The standard time to finish the job is 40 hours.
The hourly wage rate is same for both the workers. In addition workman A is entitled to
receive bonus according to Halsey Plan sharing while B is paid bonus as per Rowan plan.
The works overheads are absorbed on the job at Rs. 7.50 per labour hour worked. The
factory cost of the job come to Rs. 2,600 irrespective of the workman engaged.
Find out the hourly wage rate and the cost of raw material input. Also show cost against
each element of cost included in the factory cost.
Cost Compilation 42

20. A company is undecided as to what kind of wage scheme should be introduced. The
following particulars have been compiled in respect of three systems, which are under
consideration of the management.
Workers
A

38

40

34

Rs. 6

Rs. 5

Actual hours worked in a week

Hourly wage rate

Rs. 7.20

Production in units
Product P

21

60

Product Q

36

135

Product R

46

25

Standard time allowed per unit of each product is

12 minutes 18 minutes 30minutes

For the purpose of piece rate, each minute is value at Rs. 0.10
You are required to calculate the wages of each worker under:
i. Guaranteed hourly rate basis
ii.

Piece work earning basis, but the guaranteed at 75% of basic pay
( guaranteed hourly rate) if his earning are less than 50% of basic pay.

iii.

Premium bonus basis where the worker receives bonus based on Rowan
Scheme.

Cost Compilation 35
21. The standard hours of job X is 100 hours. The job has been completed by Siris in 60 hours,
Ramesh in 70 hours and Manoj in 95 hours.
The bonus system is applicable to the job is as follows:Percentage of time saved to time allowed

Bonus

Saving upto 10%

10% of time saved

From 11% to 20%

15% of time saved

From 21% to 40%

20% of time saved

From 41% to 100%

25% of time saved

The rate of pay is Rs. 1 per hour. Calculate the total earning of each worker and also the rate
of earnings per hour.
Cost Compilation 50
22. The existing Incentive System of Alpha Limited is as under:
Normal working week

5 days of 8 hours each plus 3 late shifts of 3 hours each

Rate of Payment

Day work: Rs. 160 per hour

Late shift: Rs. 225 per hour

Average output per operator

120 articles

for 49 hours week i.e including 3 late shifts.

In order to increase output and eliminate overtime, it was decided to switch on to a system
of payment by results. The following information is obtained:
Time rate ( as usual )

: Rs. 160 per hour

Basic time allowed for 15 articles

: 5 hours

Piece work rate

: Add 20% to basic piece rate

Premium Bonus

: Add 50% to time

Required:
(i) Prepare a statement showing hours worked, weekly earnings, number of articles
produced and labour cost per article for one operator under the following systems:
a. Existing time-rate
b. Straight piece-work
c. Rowan system
d. Halsey Premium system.
Assume that 135 articles are produced in a 40-hour week under straight piece work, Rowan
Premium system, and Halsey Premium system above and worker earns half the time saved
under Halsey Premium system.
Cost Compilation 55
23. A company uses an old method of machining a part manufactured for sale. The estimates of
operating details for the year 2007-2008 are as under:
No. of parts to be manufactured and sold

: 30,000

Raw material required per part

: 10 kg @ Rs. 2 per kg

Average wage rate per worker

: Rs. 40 per day of 8 hours

Average labour efficiency

: 60%

Standard time required to manufacture one part

: 2 hours

Overhead rate Rs. 10 per clock hour

Material handling expenses

: 2% of the value of raw materials

The company has a suggestion box scheme and an award equivalent to three months saving
in labour cost is passed on to the employee whose suggestion is accepted. In response to this
scheme suggestion has been received from an employee to use a special Jig in the
manufacture of the aforesaid part. The cost of the Jig, which has life of one year is Rs. 3,000
and the use of the Jig will reduce the standard time by 12 minutes.
Required:
i. Compute the amount of award payable to the employee who has given the suggestion.
ii. Prepare a statement showing the annual cost of production before and after the
implementation of the suggestion to use the Jig and indicate the annual savings.

iii.State the assumptions on which your calculation is based.

S. N Maheswori Q. N 4.29 page.no. A. 79

24. A, B and C were engaged on a group task for which a payment of Rs. 725 was to be made.
As time basis wages are Rs. 8 per day, Bs Rs. 6 per day and Cs Rs. 5 per day. A worked
for 25 days; B worked for 30 days; and C for 40 days. Distribute the amount of Rs. 725
among three workers.
Study Material 17
25. In a unit, 10 men work as a group. When the production for the group exceeds the standard
output of 200 pieces per hour, each man is paid an incentive for the excess production in
addition to his wages at hourly rates. The incentive is at half the percentage, the excess
production over the standard bears to the standard production. Each man is paid an incentive
at the rate of this percentage of a wage rate of Rs. 2 per hour. There is no relation between
the individual workmans hourly rate and the bonus rate.
In a week, the hours worked are 500 hours and the total production is 120,000 pieces.
(a) Compute the total amount of the bonus for the week.
(b) Calculate the total earnings of two workers A and B of the group:
A worked 44 hours and his basic rate per hour was Rs. 2.20
B worked 48 hours and his basic rate per hour was Rs. 1.90
Cost Compilation 18
26. In a manufacturing concern 20 workmen work in a group. The concern follows a group
incentive bonus system whereby each workman belonging to the group is paid a bonus on
the excess output over the hourly production standard of 250 pieces, in addition to his
normal wages at hourly rate. The excess of production over the standard is expressed as a
percentage and two-third of this percentage is considered to be the share of the workman
and is applied on the national hourly rate of Rs. 6 (considered only for purpose of
computation of bonus). The output data for a week are stated below.
Days

Man-hours worked

Output (in pieces)

Monday

160

48,000

Tuesday

172

53,000

Wednesday

164

40,000

Thursday

168

52,000

Friday

160

46,000

Saturday

160

42,000

Total

984

281,000

You are required to:

i.

Work out the amount of bonus for the week and the average rate at which each
workman is to be paid the same.

ii.

Compute the total wages including bonus payable to Ram who worked for 48 hours at
an hourly rate of Rs. 2.50 and to Annie who worked for 52 hours at an hourly rate of
Rs.3

S.N Maheswori Q. N 4.32 page no. A.81