This method is also called the piece rate system.
Under this system, wages are fixed at a specific rate per unit.
Workers receive wages on the basis of their ability, energy and speed of work.
Wage rate is per meter, piece, kg, quintal, ton, square feet/meter, cubic feet/ meter etc.
It is applied where:
· Quality of work is not more important e.g. mining, bricks, plugging etc.
· Measurement of work is direct labour basis or unit basis
· Work demands a low degree of skill.
· Job rate can be fixed
Under this, wages are depended on the quantity of output.
A single piece rate is used for wages.
Per piece, wage rate is fixed in advance.
Skilled workers get more wages than an unskilled worker.
Total wage earned |
= Produced units x Wage rate per unit |
Where: |
|
Standard output per hour |
= Second in an hour ÷ Seconds need per unit |
Or |
= Minutes in an hour ÷ Minutes need per unit |
|
|
Wage rate per unit |
= Wage per hour ÷ Output per hour |
Or |
= Wage per day ÷ Output per day |
The main advantages of the piece rate system are:
It is an improvement of the time wage system.
Unskilled, semi-skilled and skilled labour can earn according to their capacity.
An increase in production reduces the fixed cost per unit.
Wages for idle time is not paid in this system.
Unskilled workers are motivated to be skilled.
Less supervision is required.
The main disadvantages of the piece rate system are:
It is difficult to fix a suitable piece work rate.
Unskilled workers will be frustrated due to fewer wages.
It is not suitable for the quality product because ‘haste makes waste.’
Increase production will not decrease cost.
Workers may work more hours to earn more wage, thus they lose their health.
Bases |
Time rate system |
Piece rate system |
Base |
Wages are based on the time worked. |
Wages are based on unit produced. |
Efficiency |
Wages are not linked with the efficiency of the workers. |
Wages are directly linked with the efficiency of the workers. |
Supervision |
Supervision for quality work is not needed. |
Supervision is required for quality work. |
Wastage |
There is less chance of wastage of material. |
There is a high chance of wastage of materials. |
Cost |
The cost of production can be not be minimized. |
The cost of production can be minimized. |
Wages fix |
Easy to fix wage rate. |
It is not easy to fix the wage rate. |
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Accounting for Share |
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Share in Nepali |
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Debentures |
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Final Accounts: Class 12 |
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Final Accounts in Nepali |
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Work Sheet |
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Ratio Analysis (Accounting Ratio) |
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Fund Flow Statement |
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Cash Flow Statement |
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Theory Accounting Xii |
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Theory: Cost Accounting |
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Cost Accounting |
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LIFO−FIFO |
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Cost Sheet, Unit Costing |
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Cost Reconciliation Statement |
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Most of the company provides its employees extra benefits to encourage them.
There are two types of benefits or expenses.
One is monetary and the other is a non-monetary expense.
Monetary expenses are paid in cash but non-monetary expenses are not paid in cash.
Monetary benefits |
Non-monetary (non-pecuniary) Benefits |
Pecuniary benefits |
Medical facilities |
Wages and salaries |
Entertainment |
Dearness allowance |
Educational |
Home allowance or house rent allowance |
Training facilities |
Overtime pay |
Subsidized canteen facilities |
Holiday and vacation pay |
Subsidized transportation |
An incentive for targeted/ standard production |
Subsidized housing |
Profit-sharing bonus etc. |
Re-creation and sports facilities |
Deferred monetary benefits |
Leave facilities etc. |
Contribution for provident fund |
|
Contribution for group insurance |
|
Contribution for pension fund etc. |
|
Keep in Mind (KIM)
There are other some special allowances and incentives such as chairman allowance, audit allowance and night shift allowance etc. |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2A
Extracted data are taken from RS Furniture Industries:
Small tables made by a carpenter during a month |
15 pieces |
Straight piece rate per table |
Rs 500 |
Required: (a) Wage earned during a month; (b) No. of tables table if carpenter has earned Rs 10,000
[Answer: (a) Rs 7,500; (b) 20 tables]
Solution:
Wage earned during a month
Total wage earned |
= |
No. of units × Wage rate per unit |
|
= |
15 tables × Rs 500 |
|
= |
Rs 7,500 |
Piece rate per table if he has earned Rs 10,000
Total wage earned |
= |
Produced units x Wage rate per unit |
10,000 |
= |
No. of table x Rs 500 |
No. of table |
= |
10,000 ÷ 500 |
|
= |
20 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2B
Extracted data are taken from ABC Book Binders:
Standard time allowed for per unit |
10 minutes |
Wage rate per hour |
Rs 30 |
Units made by worker A during a month |
6,200 units |
Units made by worker B during a month |
5,000 units |
Required: Total wage earned by each worker
[Answer: Total wages: A = Rs 31,000; B = Rs 25,000]
SOLUTION
Given and working note:
Standard output per hour = 60 minutes ÷ 10 minutes = 6 units
Wage rate per unit = Rs 30 ÷ 6 units = Rs 5
Total wage earned by each worker
Total wage earned |
= No. of units x Wage rate per unit |
|
Worker A |
= 6,200 units x Rs 5 |
= Rs 31,000 |
Worker B |
= 5,000 units x Rs 5 |
= Rs 25,000 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2C
The following information of BC Manufacturing Company is given to you:
Normal wage rate per hour |
Rs 66 |
Normal time allowed per units |
30 second |
Normal working hour per day |
8 hours |
Units produced during one day by worker A = 960 units and B = 1,000 units
Required: (a) Standard output per hour; (b) Wages rate per unit of output; (c) Wage earned by each worker
[Answer: (a) Standard output: Per hour = 120 units; per day = 960 units;
(b) Wage rate per unit = Rs 0.55; (c) Total wage: A = Rs 528; B = Rs 550]
SOLUTION:
Given and working note:
30 second = 0.5 minute
1 unit requires = 0.5 minute
1 hour = 60 minutes
8 hours (8 hours x 60 minute) = 480 minutes
Standard output per hour
In 0.5 minute, unit produced |
= 1 unit |
|
In 1 hour (60 minutes), units produced |
= 60 ÷ 0.5 |
= 120 units |
In 8 hours (480 minutes), units produced |
= 480 ÷ 0.5 |
= 960 units |
Wages rate per unit (WRPU)
= Rs 66 per hour ÷ 120 units per hour
= Re 0.55
Wage earned by each worker
Total wages |
= Produced units x WRPU |
|
A |
= 960 units x Re 0.55 |
= Rs 528 |
B |
= 1,000 units x Re 0.55 |
= Rs 550 |
#####
PROBLEMS AND ANSWERS OF PIECE RATE SYSTEM |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2A
Amir works in a carpet factory and produced 10 carpets in a month. According to the rule of the factory wage payable to workers is Rs 800 per piece of carpet produced.
Required: Wage earned for the month
[Answer: Total waged = Rs 8,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2B
The following information is given relating to wages:
Output produced by worker: 600 units
Time allowed for 5 units of output: 1 hour
Wages rate per hour: Rs 120
Required: Wage amount of the worker
[Answer: Wages = Rs 14,400]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2C
The following information is given relating to wages:
Wages rate per hour: Rs 90
Time required per unit of output: 30 minutes
Output produced by worker: 500 units
Required: Wage amount of the worker
[Answer: Wages = Rs 22,500]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2D
The time allowed to produce 20 units of output is 1 hour.
A worker produced 2,000 units during the month.
The fixed wage per hour is Rs 90
Required: Wages of the worker for the month
[Answer: Wages = Rs 9,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2E
The following information is given:
Standard output per hour: 10 units
Wage rate per unit: Rs 25
Actual worked hour: 40 hours
Required: Total wage of the worker
[Answer: Wages = Rs 10,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2F
The following information is given relating to wages:
Output per hour: 4 units
Wage rate per unit: Rs 10
Working time for a month: 200 hours
Required: Total wage for the month
[Answer: Wages = Rs 8,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2G
The following information of JK Manufacturing Company is provided to you:
Normal time per unit |
10 minutes |
|
Normal wage rate per hour |
Rs 60 |
|
Units produced by A |
600 units |
|
Units produced by B |
750 units |
|
Required: (1) Wage rate per unit; (2) Total wage earned by A and B
[Answer: A’s earning = Rs 6,000; B’s earning = Rs 7,500]
*WRPU = Rs 60 ÷ 6 units = Rs 10
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