Premium plan is also called incentive wage system and bonus plan system.
Time and piece wages system have their own advantage and disadvantage.
By the disadvantage of them, this incentive wage system has been developed.
It is developed to provide financial benefits to skilled workers and workers are separated as skilled and unskilled.
Some common features of this system are:
· Time wages are guaranteed
· As production increase, labour remuneration also increases; but not in proportion of output.
· As efficiency increase, wage cost per unit reduces.
Under this plan, various plans have been developed.
Among them, the popular plans or systems are as follow:
Halsey Premium Plan
Rowan Plan
Taylor Plan
Gantt Task Plan
Priestman’s Plan
Scanlon’s Plan
This plan is introduced by David Rowan in 1901.
Under this system, basic wage is guaranteed for the actual time attended by the workers.
Standard time is preset for the task or work.
Bonus is allowed to the worker if he/she completes work before standard time.
Total wage or earning |
= Basic wages + Bonus |
Basic wages |
= Time taken x Wage rate |
Bonus |
= [(Standard time – Time taken) ÷ Standard time] × Time taken x Wage rate |
Total wage under Rowan premium plan
= Time taken × Wage rate + [(Standard time – Time taken) ÷ Standard time] × Time taken × Wage rate
= Time taken × Wage rate + (Time saved ÷ Standard time) × Time taken × Wage rate
Keep in Mind (KIM)
Actual remuneration = Basic wage = Time taken x Wage rate per hour |
The main advantages of Rowan plan are:
This plan is guaranteed minimum wage to workers.
Fixed cost per unit is reduced with increase production.
Labour cost per unit is reduced because wages on saved time shared between workers and employees.
The main disadvantages of Rowan plan are:
Wage calculation is complex under this method.
Incentive is less than 50% in this methods compare with Halsey plan.
Bonus on saved time shared between workers and employees; workers expect full benefit.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4A
The extracted data are given below:
Standard working hours in a week 48 hours
Worker took time to complete work 40 hours
Wage rate per hour $36
Required: (1) Basic wage under Rowan system; (2) Bonus under Rowan system; (3) Total wages earned under Rowan plan
[Answer: (1) $1,440; (2) $240; (3) $1,680]
SOLUTION:
Basic wages under Rowan system
= Time taken x Wage rate
= 40 hours x $36
= $1,440
Bonus under Rowan system
= (Standard time – Time taken) ÷ Standard time × Time taken × Wage rate
= (48 hours – 40 hours) ÷ 48 hour × 40 hours × $36
= 8 ÷ 48 × 40 × 36
= $240
Total wages earned under Rowan plan
= Basic wage + Bonus
= $1,440 + $240
= $1,680
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Accounting Equation |
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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4B
Following extracted information are supplied to you:
Standard time allowed for the job 10 hours
Guaranteed wage per hour $20
Wage rate per unit under Rowan plan $24
Required: (1) Actual time taken; (2) Actual remuneration
[Answer: (1) 8 hours; (2) $192]
SOLUTION:
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4C
The extracted data are given below:
Standard time pre fixed for job 10 hours
Time rate per hour $30
Actual time taken by workers:
Anuj 5 hours
Anjana 8 hours
Anjil 10 hours
Required: Total wage earned by each worker under Rowan plan
[Answer: Anuj = $225; Anjana = $270; Anjil = $240]
SOLUTION:
Premium plan
= Time taken x Wage rate + (Standard time – Time taken ÷ Standard time) x Time taken x Wage rate
= (TT x WR) + (ST – TT) ÷ ST × TT × WR
Anuj
= (5 x $30) + (10 – 5) ÷ 10 × 5 x $30
= $150 + 0.5 x 5 × $30
= $150 + $75
= $225
Anjana
= (8 x $30) + (10 – 8) ÷ 10 × 8 x $30
= $240 + 0.2 x 5 × $30
= $240 + $30
= $270
Anjil
= (8 x $30) + (10 – 10) ÷ 10 × 8 × $30
= $240 + 0 x 5 x $30
= $240 + $0
= $240
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PROBLEMS AND ANSWERS OF ROWAN PLAN |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4A
The extracted data related to Rowan plan are given below:
Standard time pre fixed by company 50 hours
Actual time taken to complete work by worker 40 hours
Wage rate per hour $54
Required: Total wages
[Answer: $2,592]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4B
The extracted data related to Rowan plan are given below:
Standard time pre fixed by company 10 hours
Actual time taken to complete work by worker 8 hours
Wage rate per hour $30
Required: (1) Basic wages; (2) Bonus; (3) Total wages
[Answer: (1) $240; (2) $40; (3) $280]
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