Time Wage System | Accounting for Labour | Problems and Solutions
Arjun EP
Time Wage System
This method is also called the time rate system.
Under this system, wages are paid to workers on a time basis.
It is not related to output.
It may be paid on an hourly, daily, weekly or monthly basis.
This system is applied where:
Quality of work is more important than the volume
The measure of work is indirect labour basis.
Work demands a high degree of skill.
Production involves delay and interruption due to another factor.
Formulas of total wage
|
Total wage |
= Daily working hours x Wage rate per hour |
|
|
= Daily working hours x Numbers of days x Wage rate per hour |
Advantage of the time wage system
The main advantages of the time rate system are:
This process is simple and easy to understand.
It is more useful where quality products are manufactured.
It is useful to fresher or unskilled workers because minimum wages are allowed.
This method is favoured by trade union because workers are paid an equal wage.
Disadvantage of time rate system
The main disadvantages of the time rate system are:
Production is low because there is no relation between input and output.
No differences between skilled and unskilled workers; skilled workers frustrated because the wage is the same.
Labour cost per unit is difficult to set in advance.
Workers are paid wages for idle time; it is not good for the company.
It encourages a tendency to do overtime.
Strict supervision is required to get work from workers.
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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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Fringe Benefits
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 |
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Pecuniary benefits |
Medical facilities |
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Wages and salaries |
Entertainment |
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Dearness allowance |
Educational |
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Home allowance or house rent allowance |
Training facilities |
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Overtime pay |
Subsidized canteen facilities |
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Holiday and vacation pay |
Subsidized transportation |
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An incentive for targeted/ standard production |
Subsidized housing |
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Profit-sharing bonus etc. |
Re-creation and sports facilities |
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Deferred monetary benefits |
Leave facilities etc. |
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Contribution for provident fund |
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Contribution for group insurance |
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Contribution for pension fund etc. |
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Keep in Mind (KIM)
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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: 1A
The following information is provided:
|
Working hour per day |
8 hours |
|
Hourly wage rate |
Rs 30 per hour |
|
Working days per month |
25 days |
Required: (1) Worked hours for the month; (2) Total wages for the month by using time wage system
[Answer: (1) 200 hours; (2) Rs 6,000]
SOLUTION:
|
Worked time |
= 25 days x 8 hours |
|
|
= 200 hours |
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|
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|
Total wages |
= Worked hours x Wage rate per hour |
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|
= 200 hours x Rs 30 |
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|
= Rs 6,000 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1B
Extracted data are taken from ABC Manufacturing Company:
|
Prefixed wage rate per hour |
Rs 28 |
|
Working hour per day |
8 hours |
|
Working days in a month |
25 days |
Required: Total wage during a month
[Answer: Rs 5,600]
SOLUTION
|
Total wage |
= Daily working hours x Numbers of days x Wage rate per hour |
|
|
= 8 hours x 25 days x Rs 28 |
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|
= Rs 5,600 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1C
Extracted data are taken from a contractor:
Wage rate per day (of 8 hours) Rs 180
Average working days in a month 25 days
Required: (1) Total wages during a month; (2) Wage rate per hour
[Answer: (1) Total wages = Rs 4,500; (2) WRPH = Rs 22.50]
Solution:
|
Total wages during a month |
||
|
Total wage |
= |
No. of working days x Wages rate per day |
|
|
= |
25 days x Rs 180 |
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|
= |
Rs 4,500 |
Wage rate per hour (WRPH)
WRPH = Rs 180 per day ÷ 8 hours per day = Rs 22.50
Overtime
When a worker does more work than a standard work hour, it is known as overtime.
Suppose, standard time per day is 8 hour and a worker works for 10 hours; in this condition, overtime is 2 hours (10 – 8).
Somewhere, the company pays double (200%) wages amount for overtime; somewhere equal (100%); somewhere 75% and somewhere 50%.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1D
The following extracted information of a worker is given to you:
|
Days |
Sun |
Mon |
Tue |
Wed |
Thu |
Fri |
Sat |
|
Worked hours |
10 |
8 |
9 |
12 |
11 |
6 |
Off |
Wages rate per hour is Rs 40. Daily working hours are 8 hours. The overtime wage rate is Rs 30 per hour, which is 75% of the standard rate.
Required: (a) Total wages during a week; (b) Wage rate per hour including overtime
[Answer: (a) Total wages = Rs 2,140; (b) WRPH = Rs 38.21]
Solution:
Given and working note:
|
Days |
Worked hours |
Normal working hours |
Overtime |
|
Sunday |
10 |
8 |
2 |
|
Monday |
8 |
8 |
– |
|
Tuesday |
9 |
8 |
1 |
|
Wednesday |
12 |
8 |
4 |
|
Thursday |
11 |
8 |
3 |
|
Friday |
6 |
6 |
– |
|
Saturday |
Holiday |
Holiday |
− |
|
Total |
56 hours |
46 hours |
10 hours |
Now,
|
Total wages during a week |
||||
|
Total wages |
= |
Normal wages |
+ |
Overtime wages |
|
|
= |
(46 hours x Rs 40) |
+ |
(10 hours x Rs 30) |
|
|
= |
Rs 1,840 |
+ |
Rs 300 |
|
|
= |
Rs 2,140 |
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|
Wage rate per hour including overtime
WRHP = Total wages ÷ Worked hours = Rs 2,140 ÷ 56 hours = 38.21
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1E
The pay roll sheet of worker Manoj has the following working hours:
|
Days |
Sun |
Mon |
Tue |
Wed |
Thu |
Fri |
Sat |
|
Worked hours |
Off |
10 |
8 |
9 |
11 |
12 |
7 |
Wages rate per hour is Rs 30. Daily working hours are 8 hours. Overtime is paid 1.5 times of normal wage.
Required: (a) Total wages during a week; (b) Wage rate per hour including overtime
[Answer: (a) Rs 1,860; (b) Rs 32.63]
SOLUTION
Given and working note:
|
Days |
Worked hours |
Normal working hours |
Overtime |
|
Sunday |
– |
Holiday |
– |
|
Monday |
10 |
8 |
2 |
|
Tuesday |
8 |
8 |
– |
|
Wednesday |
9 |
8 |
1 |
|
Thursday |
11 |
8 |
3 |
|
Friday |
12 |
8 |
4 |
|
Saturday |
7 |
7 |
– |
|
Total in hours |
57 |
47 |
10 |
Now,
|
Total wages during a week |
||||
|
Total wages |
= |
Normal wages |
+ |
Overtime wages |
|
|
= |
(47 hours x Rs 30) |
+ |
(10 hours x Rs 30 x 1.5) |
|
|
= |
Rs 1,410 |
+ |
Rs 450 |
|
|
= |
Rs 1,860 |
|
|
Wage rate per hour including overtime
= Total wages ÷ Worked hours
= Rs 1,860 ÷ 57 hours
= Rs 32.63
When Total Wages Is Given
When wages or total wages is given in the question, students are required to find out daily working hours, worked days or wage rate per hour.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1F
The following labour costing information of a factory is provided to you:
|
Total weekly wages |
Rs 2,880 |
|
No. of days worked |
6 days |
|
Wage rate per hour |
Rs 60 |
Required: Daily working hours
[Answer: Daily working hours = 8 hours]
SOLUTION:
Given and working note:
Total weekly wage = Rs 2,880
No. of worked days = 6 days
Wage rate per hour (WRPH) = Rs 60
Now,
|
Total wages |
= |
Daily working hours x Worked days x WRPH |
|
Rs 2,880 |
= |
Daily working hours x 6 days x Rs 60 |
|
2,880 |
= |
Daily working hours x 360 |
|
Daily working hours |
= |
2,880 ÷ 360 |
|
|
= |
8 hour |
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PROBLEMS AND ANSWERS OF TIME WAGE SYSTEM |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1A
The following extracted information is provided:
|
Working hour per day |
8 hours |
|
|
Hourly wage rate |
Rs 45 |
|
|
Working days per month |
24 days |
|
Required: Total worked hours and wages for the month by using the time wage system
[Answer: Worked hours = 192 hours; Total wage = Rs 8,640]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1B
A worker worked in a factory for 8 hours a day. His hourly wage rate is Rs 35. The number of working days in a month is 25 days.
Required: (a) Total worked hours for the month; (b) Total wages for the month
[Answer: Worked hours = 200 hours; Wages = Rs 7,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1C
Mohan worked in a factory for 8 hours a day. His hourly wage rate is Rs 55. The number of working days in a month is 24 days.
Required: (a) Total worked hours for the month; (b) Total wages for the month
[Answer: Worked hours = 192 hours; Wages = Rs 10,560]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1D
The following labour costing information of a factory is provided to you:
|
Total weekly wages |
Rs 3,300 |
|
|
No. of days worked |
6 days |
|
|
Wage rate per hour |
Rs 50 |
|
Required: Daily working hours
[Answer: Daily working hours = 11 hours]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1E
The total wage earned by a worker for a month of 24 working days is Rs 9,600. The working hour for a day is 8 hours.
Required: Wage rate per hour
[Answer: WRPH = Rs 50]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1F
AH Manufacturing Enterprise provides the following information for a month:
|
Daily working hours |
8 hours |
|
|
Wage earned in January |
Rs 13,520 |
|
|
Wage rate per hour |
Rs 65 |
|
Required: Working days for the month
[Answer: Working days = 26]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1G
The time card shows that a worker worked for 64 hours in a week. 6 working days are in a week. The normal time for a day is 8 hours and the normal rate of wage is Rs 40 per hour whereas the overtime rate is 1.5 times of normal time rate.
Required: Wage earned of the worker
[Answer: Total wage = Rs 2,880; *Overtime (64 – 48) = 16 hours]
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