CA Intermediate · Cost and Management Accounting · Employee Cost and Direct Expenses
Under the Rowan plan, a worker at Sundaram Engineering has a time allowed of 20 hours, takes 15 hours, and earns Rs 60 per hour. What is the total earning for the job?
Total earning is Rs 1,125. Rowan bonus equals time saved over time allowed, times time taken, times rate: 5/20 x 15 x 60 = Rs 225. Adding this to the time wages of 15 x 60 = Rs 900 gives Rs 1,125.
- ARs 900
- BRs 1,125Correct
- CRs 1,200
- DRs 1,050
Explanation
Time saved = 5 hours. Bonus = (time saved / time allowed) x time taken x rate = (5/20) x 15 x 60 = Rs 225. Time wages = 15 x 60 = Rs 900. Total = Rs 1,125. Rs 1,200 wrongly pays for the full allowed time (20 x 60), and Rs 900 omits the bonus.
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