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

Under Rowan plan, a worker at Sahyadri Metals has a standard time of 20 hours, a rate of Rs 60 per hour and takes 15 hours for a job. Total earnings under the Rowan plan, compared with the Halsey plan giving 50% of time saved, are:

Under Rowan the worker earns Rs 1,125 and under Halsey Rs 1,050. Rowan bonus is time saved over time allowed times time taken times rate, which is Rs 225. Halsey bonus is half of the time saved at the rate, which is Rs 150, added to Rs 900 of time wages.

  1. ARowan Rs 1,050; Halsey Rs 1,050
  2. BRowan Rs 1,125; Halsey Rs 1,050Correct
  3. CRowan Rs 1,125; Halsey Rs 1,200
  4. DRowan Rs 1,050; Halsey Rs 1,125

Explanation

Rowan: time wages = 15 x 60 = Rs 900; bonus = (5/20) x 15 x 60 = Rs 225; total Rs 1,125. Halsey: 900 + 50% x 5 x 60 = 900 + 150 = Rs 1,050. The Rowan figure is higher here because the time saved is 25% of standard time, which is below 50%... check: the Rowan bonus of Rs 225 exceeds Halsey's Rs 150, so Rowan total is Rs 1,125 and Halsey Rs 1,050.

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