ACCA Applied Knowledge · Management Accounting · Accounting for material, labour and overheads
A factory worker is paid under a piece-rate system with no guaranteed minimum. The rate is $0.80 per unit. In a 40-hour week the worker produces 1,200 units, of which 50 are rejected as defective and are not paid for. What is the worker's gross pay for the week?
The worker earns $920. Under a piece-rate system payment is made only for acceptable output, so the 50 rejected units are excluded. The 1,150 good units multiplied by $0.80 per unit give $920, whereas paying for all 1,200 units would overstate pay.
- A$920.00Correct
- B$960.00
- C$1,000.00
- D$40.00
Explanation
Only good units are paid: 1,200 - 50 = 1,150 units x $0.80 = $920. Paying for all 1,200 units gives $960, which wrongly ignores the rejected units. $1,000 and $40 do not follow from the data.
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