CA Intermediate · Cost and Management Accounting · Employee Cost and Direct Expenses
Kaveri Engineering uses the Rowan plan. Standard time for a job is 50 hours, actual time taken is 40 hours, and the rate is Rs 80 per hour. What is the total earning of the worker for the job?
Under the Rowan plan the bonus is time saved divided by time allowed, multiplied by time taken and the hourly rate. Here that is 10/50 x 40 x 80 = Rs 640, which added to basic wages of Rs 3,200 gives total earnings of Rs 3,840.
- ARs 3,200
- BRs 3,840Correct
- CRs 3,520
- DRs 4,000
Explanation
Time saved = 10 hours. Basic wages = 40 x 80 = Rs 3,200. Rowan bonus = (time saved / time allowed) x time taken x rate = (10/50) x 40 x 80 = Rs 640. Total = Rs 3,840. Rs 3,520 results from wrongly using the Halsey 50% bonus (Rs 320), and Rs 4,000 pays for the full 50 standard hours.
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