Lecture No-12 Hands-Out Questions and its solution.

Some Important Formulas relating to labor cost.

I have simplify/or re-write the formula in easy mode for your convenience, so whenever solve
question from any reference book use that formulas. I hope so that solving of question would be
very simple for you.

1. Basic salary = Actual hour worked x Rate per hour paid

2. Total/gross salary = Basic salary + Bonus

3. Halsay Premium Plan= (Bonus Calculation)

= Time allowed – Time taken x Time rate (rate per hour)

2

4. Halsay-weir Premium Plan. = (Bonus Calculation)

= Time allowed – Time taken x hourly paid rate x 33.336667%

(That’s 33.33667% x is according to formula)

5. Rowan Premium bonus Plan

= Time allowed – Actual time taken x 100%

Time allowed
 Example of solving this formula intention needed
Wage rate per hour Rs.1.50
Time allowed for the
job 16 hours
Time taken 12 hours

= Time allowed – Actual time taken x 100

Time allowed
= 16- 12
= 4 hours = 4 x 100 = 25%
Time allowed 16

= Basic wages 12 x 1.50 = 18

Bonus 18@ 25% = 4.50
Total wages = 22.5

Alternate Rowan Plan Method:

You may calculate Bonus according Rowan Plan Method,

You may use that formula to calculate Rowan Plan

Time taken x Time saved x rate per hour.

Time allowed

Basic salary = 12 x 1.50 = 18

Bonus = 12 x 4(16-12) x 1.50 = 4.50
16 22.5
Answer to Question no 1 to 5

Answer no-1
Basic salary = Actual hour worked x Rate per hour paid

Halsay Premium Plan= (Bonus Calculation)

Employee A = Time allowed – Actual time taken x hourly rate

2
Rs.
Bonus = 70 – 50 x 7 = 70
2
Basic Pay = 50 x 7 = 350
Total Pay 420

Employee B = Time allowed – Actual time taken x hourly rate

2
Rs.
Bonus = 60 – 48 x 8 = 48
2
Basic Pay = 48 x 8 = 384
Total Pay 432

Employee C = Time allowed – Actual time taken x hourly rate

2
Rs.
Bonus = 52.5 – 46 x 10 = 32.5
2
Basic Pay = 46 x 10 = 460
Total Pay 492.50

Calculation:
Employee A
Revised Time allowed for 200 units = (200 x 35/100) = 70 hours
If we are intending to produced 200 units how much time will be taken

Employee B
Revised Time allowed for 150 units = (150 x 40/100) = 60 hours
If we are intending to produced 150 units how much time will be taken

Employee C
Revised Time allowed for 125 units = (125 x 42/100) = 52.5 hours
If we are intending to produced 125 units how much time will be taken
 Halsay-weir Premium Plan. = (Bonus Calculation)

Time allowed – Time taken x hourly paid rate x 33.336667%

Employee A
Bonus Calculation = 70 – 50 x 7 x 33.336667% = 46.67
Basic salary = 50 x7 = = 350
Total Pay = 397.

Employee B
Bonus Calculation = 60 – 48 x 8 x 33.336667% = 32
Basic salary = 48 x8 = = 384
Total Pay = 416

Employee C
Bonus Calculation = 52.5 – 46 x 10 x 33.336667% = 22
Basic salary = 46 x10 = = 460
Total Pay = 482

Rowan Premium bonus Plan

Time taken x Time saved x rate per hour.

Time allowed

Employee A
Basic salary = 50 x 7 = 350
Bonus = 50 x 20(70-50) x 7 = 100
70 450

Employee B
Basic salary = 48 x 8 = 384
Bonus = 48 x 12(60-48) x 8= 76.8
60 460.80

Employee C
Basic salary = 46 x 10 = 460
Bonus = 46 x 6.5 (52.5-46) x 10 = 57
52.5 517.
Knotty point in this question
In normal question straight away Time allowed not tell about for how much units and actual
how much units produced. Simply given as you have seen in previous Halsay plan example in
hands-out. Time taken and time allowed but that question is knotty. So we have to revise our
time allowed due to change in production quantity. Calculation of actual time allowed because
according to question time allowed to A 35 hour for per 100 units produced, now he produced
200 units in 50 hours, suppose if we allowed him time to make 200 units, instead of making 100
units then time would be 70 hours. Now same working we do revise for rest of employee B and C

Question No-2
1- Compute the rate and amount of bonus for the week.

Standard Production = 480 @ 200= 96000 pieces

Actual Production = 117,600 pieces

Differences 21,600

21,600/96000 x 0.5 = Rs. 0.1125 per hour

Total Group Bonus = 0.1125 @ 480 = Rs.54

2- Employee A Total Pay

Basic 41 @ 0.35 = 14.35

Bonus 0.1125 @ 41 = 4.6125

Total Pay= 18.9625

Employee B Total Pay.

Basic 44 @ 0.30 = 13.2

Bonus 0.1125@ 44 = 4.95

Total Pay = 18.15

Question -03

Employee A

Piece work (with guaranteed hourly rates)

Actual production x piece rate.
200 x 0.12 = Rs. 24

Guarantee hourly rate

Actual hours x rate
40 x 0.60 = Rs 24
Total Piece work (with guaranteed hourly rates) = Rs.48

Hourly rate:
Actual hours x rate
40 x 0.60 = Rs.24

Bonus system (under which the employee receives 50% of time savings).

Calculation of time allowed

Time allowed 23 hours for 100 units but actual production is 200 units so time
allowed would recalculate 23/100 x 200 =46 hours. 32/100 x 125 = 40hours, 38/100
x 150= 57 hours

Bonus = Time allowed – Time taken x hourly rate

2

46 – 40/2 x 0.60= Rs.1.8

Employee B

Piece work (with guaranteed hourly rates)

Actual production x piece rate.
125 x 0.20 = Rs. 25

Guarantee hourly rate

Actual hours x rate
42 x 0.75 = Rs 31.5
Total Piece work (with guaranteed hourly rates) = Rs.56.5

Hourly rate:
Actual hours x rate
42 x 0.75 = Rs.31.5
Bonus system (under which the employee receives 50% of time savings).

Calculation of time allowed

Time allowed 23 hours for 100 units but actual production is 200 units so time allowed would
recalculate 23/100 x 200 =46 hours. 32/100 x 125 = 40hours, 38/100 x 150= 57 hours

Bonus = Time allowed – Time taken x hourly rate

2

40 – 42/2 x 0.75= Rs.0

Not entitled for bonus because hour taken more then hour allowed.

Employee C

Piece work (with guaranteed hourly rates)

Actual production x piece rate.
150 x 0.15 = Rs. 22.5

Guarantee hourly rate

Actual hours x rate
39 x 0.50 = Rs 19.5
Total Piece work (with guaranteed hourly rates) = Rs.42

Hourly rate:
Actual hours x rate
39 x 0.50 = Rs.19.5

Bonus system (under which the employee receives 50% of time savings).

Calculation of time allowed

Time allowed 23 hours for 100 units but actual production is 200 units so time allowed would
recalculate 23/100 x 200 =46 hours. 32/100 x 125 = 40hours, 38/100 x 150= 57 hours

Bonus = Time allowed – Time taken x hourly rate

2

57 – 39/2 x 0.50= Rs.4.5

Question No 4 Data is not available, something missing in
hands-out. I will offer you another Question

Question no -05
Commission
Rs
20,000 @ 5% = 1000

15,000@ 7.5% = 1125

Earned commission = 2125

Deductions
1500 + 2500 = 4000

4000@ 5% = 200 = 200

Net commission = 1925

Lecture No -08 (Solution file).

Question no -01

Re-order level: Maximum consumption x Lead Time [maximum] 130 x 30=3900 units.
Maximum stock level: Reorder level – (Minimum consumption x Lead time [minimum]) + EOQ
3900 – (60 x 25) + 5000 3900 – 1500 + 5000 = 7400 units Minimum stock level: Reorder level –
(Average consumption x lead time [Average]) Average lead time = Maximum + Minimum 2 3900
– (400 x 25 + 30) 2 3900 – (400 x 27.5) 3900 – 11000 = 7100 units Danger stock level: Average
consumption x Emergency lead time 400 x 25(If no emergency time given then minimum re-
orders period considered emergency lead time) 400 x 25=10,000 units

Question no -02

Maximum stock level: B Reorder level – (Minimum consumption x Lead time [minimum]) +
EOQ 4750 – (700 x3) +5000=7650 units. Working Weekly production varies from 175 to 225
units, averaging 200 units. Working= minimum weekly production is 175 units x per unit of
product required material use=4 (175 x 4= 700) RE ORDER QUANTITY CONSIDERED
Economic order quantity. Minimum stock level: A Reorder level – (Average consumption x lead
time [Average]) Average lead time = Maximum + Minimum 2 8,000 – (2000 x 2) 8000 – 4000=
4000 units. Working Weekly production varies from 175 to 225 units, averaging 200 units.
Average production of unit x units x per unit of product required material use= 200 x 10= 2000
Average lead time is given. Re order level of C is already given = 2,000 Danger stock level:
Average consumption x Emergency lead time 2000 x 1 =2000 Working Minimum delivery period
would be considered emergency lead time.

Question no -03

Re-order level: A (material) Maximum consumption x Lead Time [maximum] 75 x 6 = 450 units.
Re-order level: B (material) Maximum consumption x Lead Time [maximum] 75 x 4 = 300 units.
Maximum stock level: A Reorder level – (Minimum consumption x Lead time [minimum]) +
EOQ 450 – (25 x 4) + 400 =750 units. Maximum stock level: B Reorder level – (Minimum
consumption x Lead time [minimum]) + EOQ 300 – (25 x 2) + 600 = 850 units. Minimum stock
level: A Reorder level – (Average consumption x lead time [Average]) Average lead time =
Maximum + Minimum 2 450 – (50 x 5) 450 – 250 = 200 units. Minimum stock level: B Reorder
level – (Average consumption x lead time [Average]) Average lead time = Maximum + Minimum
2 300 – (50x 3) = 150 units. Danger stock level: A Average consumption x Emergency lead time
50 x 4 =200 units Danger stock level: B Average consumption x Emergency lead time 50 x 2 =
100 units.

Question no -04
Re-order level: Maximum consumption x Lead Time [maximum] 400 x 6 = 2400 units Maximum
stock level: Reorder level – (Minimum consumption x Lead time [minimum]) + EOQ 2400 – (250
x 4) + 1500 = 2900 units Minimum stock level: Reorder level – (Average consumption x lead time
[Average]) Average lead time = Maximum + Minimum 2 2400 – (30 x 5) = 2250 units. Danger
stock level: Average consumption x Emergency lead time 30 x 4 minimum re order period
considered emergency lead time.
Question no -05 Just skip that question. It is not up to the mark, I will give
you another good question.