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Our Presentation. WELCOME TO . Topic. Labor Cost. The Workforce Behind This Presentation. Labor Cost. Labor cost represents the human contribution to production . It is an important cost factor requiring constant measurement, control and analysis. Illustration. Labor cost consists.
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Our Presentation WELCOME TO
Topic Labor Cost
Labor Cost Labor cost represents the human contribution to production . It is an important cost factor requiring constant measurement, control and analysis.
Illustration Labor cost consists Basic Pay Fringe Benefits
Basic Pay : The basic pay for work performed is called the base rate or job rate. Fringe Benefits : Fringe cost contains incremental pay, holiday pay, vacation pay, overtime premium pay, and cost living adjustment , must be added to the base rate in order to arrived at the full labor cost.
Incentive Wage Plan Incentivewage plan is a work system where workers can get their extra benefits for the extra output than the standard one.
ImplementationFor the succession of this plan there are some conditions and situations where these must be applied. Such- • In which a worker can increase output. • More pay for output above standard. • Set fair standards so that extra efforts will result in bonus pay. • Result in immediate reward every payday.
For a company or organization To increase output To reduce unit cost To increase efficiency ratio of productivity To increase business profits For workers To earn a higher wage Purpose of Incentive Wage Plan
Types of Incentive Wage Plan • Straight Piecework Plan :According to this plan, workers get or organization pays wages above the base rate for production above the standards. • 100% Bonus Plan :The main focus of this plan on the time instead of price per piece. The worker is paid for the standard time at the hourly rate if the job or unit is completed in standard time or less.
Group Bonus Plan :This plans, like those designed for individual incentive, are intended to encourage production at rates above a minimum standard.
$6.36 15 Particular Plan Under Particular Situation • Straight Piecework Plan :4 minutes is the standard time required for producing one unit, the standard rate is 15 pieces per hour, workers base pay is $6.36 per hour. Piece Rate = = $.424 Units PerGuaranteedAdditionalTotalLabor Cost HourPaymentPaymentPaymentPer Unit 12 $6.36 -- $6. 36 0.530 15 ,, -- $6. 36 0.424 19 ,, 1.68 $8. 04 0.423
Actual Standard 100% Bonus Plan : Hours Effici- * L.C. Consu- Actual Standard ency Base Total Per WorkermedOutputOutputRatio(b)Rate(a)a*bEarenedUnit X 40 540 600 . 90 $7.50 --- $300 $.5556 Y 40 660 600 1.10 ,, --- 330 $.5000 Z 40 800 600 1.33 ,, --- 399 $.4988 *Efficiency Ratio = *When the efficiency ratio is above 1 then this is applicable otherwise no bonus is earned
Group Bonus Plan: Here, Worker = 10 Actual hours = 80 Regular Group Wage = $800 Each is paid $10 an hour for a regular 8 hour shift Units Standard Bonus (Hrs. Total Group Labor Cost ProducedHourssaved@ $10)EarningsPer Unit 350 70 $ 0 800 $2.286 425 85 $ 50 850 $2.000
Learning Curve Theory The learning curve theory specify that every time the cumulative quantity of units produced is doubled, the cumulative average time per unit is reduced by a given percentage.
Other Stimulations Overtime Earnings :It consists two elements such- a) The regular pay due for the employee's work and b) The overtime premium pay
Bonus Payment :It can be paid to employee in such ways – fixed amount or a percentage of profits, a fraction of one month wages or some other calculated amount.Vacation Pay : It is given on the vacation.
Organization for Labor Cost Accountingand Control Labor costing procedures involve : • The employment history of each worker – date hired, wage rate, vacation, sickness, promotions, tardiness and so on. • The establishment of labor time and cost standards for comparative purpose. • Productivity in relation to type of wage payment. • The output of accomplishment of each worker. • Total labor cost in each department for each payroll period.
