CMA Intermediate · Cost Accounting · Employee Costs
Which of the following is a feature of the time rate system of wage payment as compared with piece rate?
Under the time rate system earnings are fixed for the time worked regardless of output. Wages depend on hours attended, not units produced, so labour cost per unit falls when output rises, unlike piece rate where wages vary directly with output.
- AWages are directly proportional to output
- BLabour cost per unit varies with the level of output
- CEarnings are fixed for the time worked irrespective of outputCorrect
- DIt is most suitable where output can be accurately measured
Explanation
Under time rate, a worker is paid for hours attended at a fixed rate, so earnings do not change with output. Labour cost per unit therefore varies inversely with output, while the other options describe piece rate features.
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