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CA Intermediate · Cost and Management Accounting · Employee Cost and Direct Expenses

Sharma Fabricators pays a worker under the Rowan plan. Standard time for a job is 20 hours, the hourly rate is Rs 80, and the worker finishes in 15 hours. The same worker's earnings are compared with the Halsey plan at 50% sharing. By how much do the Rowan earnings differ from the Halsey earnings?

Rowan gives Rs 1,500 (Rs 1,200 wages plus a bonus of time saved over time allowed, 5/20, times time taken and rate, Rs 300). Halsey gives Rs 1,400. Rowan is therefore higher by Rs 100.

  1. ARowan is higher by Rs 50Correct
  2. BRowan is lower by Rs 50
  3. CRowan is higher by Rs 100
  4. DBoth plans give the same earnings

Explanation

Rowan: 15 x 80 = 1,200; bonus = (5/20) x 15 x 80 = 300; total 1,500. Halsey: 1,200 + 50% x 5 x 80 = 1,200 + 200 = 1,400. Difference = Rs 100 higher under Rowan. So the correct key is Rs 100 higher.

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