# Labor Costing: Practical Questions With Answers

### Reviewed by Subject Matter Experts

Updated on March 02, 2023

## Question 1

Consider the following information concerning the monthly remuneration of three workers:

• Standard production per month per worker 1,000 units
• Actual production during the month: A, 850 units; B, 750 units; and C, 950 units.
• Piece work rate is \$0.10 per unit (actual production)
• Additional production bonus is \$10 for each percentage of actual production that exceeds 80% over standard

Required: Calculate the total monthly remuneration for three workers: A, B ,and C.

## Question 2

Production sections of a factory working on a job order system pay their workers under the Rowan Premium Bonus Scheme.

Workers are also entitled to a dearness allowance of \$25 per week of 48 hours.

A worker's basic wage is \$4 per day (8 hours), and the timesheet for a week is summarized below.

 Job No. Time Allowed Time Taken 1 25 hours 20 hours 2 30 hours 20 hours

Idle time (waiting) 8 hours.

Required: Calculate the gross wages that a worker earns for the week.

### Solution

 Job No. 1 Job No. 2 Time Allowed 25 hrs. 30 hrs. Time Taken 20 hrs. 20 hrs. Time Saved 05 hrs. 10 hrs.

### Gross Earnings

 Job No. 1 \$22.00 Job No. 2 \$23.33 Idle time wages (8 x .50) \$4.00 Dearness allowance for idle time (8 x 0.50) \$4.00 Total wages \$53.33

## Question 3

An operator engaged in machining components receives an ordinary day rate of \$160 per day for an 8-hour day.

The standard output for machining the components has been fixed at \$0.80 per hour (time fixed for premium bonus). On a certain day, the worker's output on the machine is 800.

Required: Find the labor cost per 100 pieces and the wages earned under the following conditions:

• If a bonus of \$19 is paid per 100 extra output
• If paid for on straight piece work basis at the standard rate

### Solution

1. Bonus of \$19 is paid per 100 extra output

 Standard output per hour = 80 pieces Standard output per day or for 8 hours = 80 x 8 = 640 pieces Actual output in 8 hours or in a day = 800 pieces Extra output = 800 - 640 = 160 pieces

### Bonus

 For 100 extra output, bonus is = \$19.00 For 1 extra output, bonus is = \$19.100 For 160 extra output, bonus is = (19 / 100) x 160 = \$30.40 Regular wages for 8 hours = \$160.00 + Bonus = \$30.40 Total wages = \$190.40

Per 100 Piece Wages

 For 800 pieces wages = \$190.40 For 1 piece wages = \$190.40/800 For 100 pieces wages = (190.40 / 800) x 100 = \$23.80

2. Straight Piece of Rate

 Per piece wages = 160 / 640 = \$0.25 For 800 pieces wages = 800 x 0.25 = \$200 Per 100 pieces wages = (200 / 800) x 100 = \$25

Standard time for 640 pieces = 8 hrs.

Standard time for 1 piece = 8 / 640 hrs.

Standard time for 800 pieces = (8 x 800) / 640 = 10 hrs.

Time taken = 8 hrs.

Time saved or bonus hours = 10 - 8 = 2 hrs.

### Formula for Halsey Premium Scheme

50% of time saved = 2 x (50 / 100) = 1 hour

Regular wages = \$160.00

Bonus = (1 x 160) / 8 = \$20.00

Total earnings = 160 + 20 = \$180.00

Per 100 piece earnings = (180 / 800) x 100 = \$22.50

## Question 4

The time and motion study department of Moonlight Corporation has informed you that standard production on a specific item is 40 units per hour.

During the last week of December, a worker's record shows the following for each 8-hour day:

 Monday 280 units Tuesday 300 units Wednesday 320 units Thursday Factory closed Friday 360 units Saturday 400 units

Required: Prepare a schedule showing the worker's daily earnings, the effective hourly rate, and the labor cost per unit under the following conditions:

• Company uses the Halsey Premium Plan with a guaranteed rate of \$1.00 per hour and a premium of 50% of the time saved on production in excess of standard.
• Company uses Tailor's Differential Piece Rate System with rates as follows: for standard production and above, 4 cents per unit; and below standard production, 3 cents per unit.
• Company uses 100% Bonus Plan and the base wage is \$1.50 per hour.