question archive A company has its factories at two locations
Subject:AccountingPrice:3.87 Bought7
A company has its factories at two locations. Rowan plan s in use at location A and Halsey plan at location B. Standard time and basic rate of wages are same for a ob which is similar and is carried out on similar machinery. Time allowed is 60 hours. Job at location `A' is completed in 36 hours while at B, it has taken 48 hours. Conversion costs at respective places are Rs. 1,224 and Rs. 1,500. Overheads account for Rs. 20 per cent.
Required: (a) To find out the normal wage rate, and (b) To compare respective conversion costs.
Answer:
a.) A good wage system should have inter alia the following features:
b.)
(i) Let Rs. x per hour be the normal wage rate. Wage rate at location A will be Rs. 36 x and for location B it will be Rs. 48 x, on the basis of actual time taken, as against 60 hours permitted. For time saved, bonus will be payable as under Location A
Bonus under Rowan system = Time saved / Time allowed*Hrs worked * Rate/hr
=24/60*36* X = 14.4x
Total wages = Rs. 36x + Rs. 14.4x = Rs. 50.4x
Overheads @ Rs. 20 per hour worked Rs. 720.
Therefore, total conversion cost is 50.4x + 720 = 1224
or x = Rs. 10
Location B
Bonus under Halsey plan = 50% of time saved x rate per hour = 50% of 12 x
= Rs. 6x
Total wages = 48x + Rs. 6x = Rs. 54 x
Overheads Rs. 20 per hour = Rs. 960
Total conversion cost is 54 x + 960 = 1500
or, x = 10
(ii) Prime cost
Comparative conversion cost
A (Rowan) B(Halsey)
Rs. Rs.
Wages @ Rs. 10 per hour 360 480
Bonus 144 60
Overheads 720 960
1,224 1,500