CAF-5 · Chapter 17 · Question 17 of 20
(Labour Costing: Premium Bonus Plan) A factory sets a standard time of 30 minutes to produce one unit. The standard basic wage is Rs. 80 per hour. An employee produces 100 units in a 40-hour work week. Under a premium bonus scheme, the employee is paid a bonus equal to 50% of the time saved, valued at the basic hourly rate. What is the total labour cost per unit produced by this employee?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 36.00
Explanation
Standard time allowed for 100 units = 100 * 0.5 hours = 50 hours. Actual time taken = 40 hours. Time saved = 10 hours. Basic pay = 40 hours * Rs. 80 = Rs. 3,200. Bonus = 50% * 10 hours saved * Rs. 80 = Rs. 400. Total Earnings = 3,200 + 400 = Rs. 3,600. Labour Cost per unit = Rs. 3,600 / 100 units = Rs. 36.00.
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