Question 1

A company uses on old method of machining a port manufactured for sale. The estimates of
operating details for the year 1987-88 ore as under.
No. of parts to be manufactured and sold 30,000
Raw materials required per part: 10 kg @ Rs. 2 kg
Average wage rate per worker: Rs. 40 per day of 8 hrs.
Average labour efficiency 60%
Standard time required to manufacture one part: 2 hrs.
Overhead rate Rs. 10 per clock hour.
Material handling expenses - 2% of the value of raw materials.
The company has a suggestion box scheme and an award equivalent to three months saving in
labour cost is passed on to the employee whose suggestion is accepted. In response to this
scheme, a suggestion has been received from an employee to use a special Jig in the
manufacture of the aforesaid part. The cost of the Jig which has life of one year is Rs. 3,000 and
the use of the Jig will reduce the standard time by 12 minutes.
Required:
i. Compute the amount of award payable to the employee who has given the suggestion.
ii. Prepare a statement showing the annual cost of production before and after the
implementation of the suggestion to use the Jig and indicate the annual savings.
iii. State the assumptions on which your calculations are based.

Question 2
The existing Incentive system of Alpha limited is as under:
Normal working week 5 days of 8 hours each plus 3 late shifts of 3 hours each
Rate of payment Day work: Rs. 160 per hour
Late shift: Rs. 225 per hour
Average output per operator for 49 - hour’s week i.e. including 3 late shifts is 120 articles
In order to increase output and eliminate overtime, it was decided to switch on to a system of
payment by results. The following information is obtained:
Time rate (as usual) : Rs. 160 per hour
Basic time allowed for 15 articles : 5 hour
Piece - work rate : Add 20% to basic piece rate
Premium Bonus : Add 50% to time
Required: Prepare a statement showing hours worked, weekly earnings, number of article
product and labour cost per article for one operator under the following systems.
a. Existing time rate
b. Straight piece work
c. Rowan system
d. Halsey premium system
Assume that 135 articles are produced in a 40 hour week under straight piece work, Rowan
premium system and Halsey premium system above and worker earns half the time saved
under Halsey premium system.

Question 3
In a factory, the basic wage rate is Rs. 10/hrs and overtime rate as followed.
Before and after normal working 175% of basic wages rate
Sunday and holiday 225% of basic wages rate
During previous year, the following hrs were worked
Normal time 100,000 hrs
OT before and after working Hours 20,000 hrs
OT on Sunday and holiday 5,000 hrs
Total 125,000 hrs
The following hrs have been worked on Job Z
Normal 1000 hrs
OT before and after Working Hours 100 hrs
OT on Sunday and holiday 25 hrs
Total 1125 hrs
Required: Calculate labour cost chargeable to job Z and OH in each of the following cases.
a. OT worked regularly as a policy due to labour shortage.
b. OT worked irregularly to meet production requirement.
c. OT worked at the request of customer.