CA Intermediate · Cost and Management Accounting · Employee Cost and Direct Expenses
Verma Engineering uses the Rowan plan. Standard time is 50 hours, actual time taken is 40 hours and the rate is Rs 60 per hour. What is the total earnings of the worker?
Earnings are Rs 2,880. Time wages are 40 hours at Rs 60, which is Rs 2,400, and the Rowan bonus is time saved over time allowed (10/50) times time taken times rate, giving Rs 480.
- ARs 2,400
- BRs 2,880Correct
- CRs 3,000
- DRs 2,640
Explanation
Time wages = 40 x 60 = Rs 2,400. Rowan bonus = (time saved / time allowed) x time taken x rate = (10/50) x 40 x 60 = Rs 480. Total = 2,400 + 480 = Rs 2,880. Rs 3,000 results from paying full time saved (Rs 600) as bonus, which is wrong.
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