ACCA Applied Knowledge · Management Accounting · Accounting for material, labour and overheads
Which of the following is a feature of a time-rate (time-based) remuneration system compared with a piece-rate system?
Under a time-rate system, labour cost per unit rises when output falls, because wages are fixed by hours worked rather than output. The other features listed belong to piece-rate systems, where pay varies with units produced.
- APay is directly linked to the number of units produced
- BLabour cost per unit rises when output falls, since pay is fixed for the hours workedCorrect
- CEmployees have a strong incentive to maximise output at the expense of quality
- DLabour cost per unit is constant at all output levels
Explanation
Under time rates, pay depends on hours worked, so lower output means the same wages are spread over fewer units and unit labour cost rises. The other options describe piece-rate features: output-linked pay, quantity over quality and constant unit labour cost.
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