Calculate effective rate of earnings per hour

Reference no: EM132820769

Question - X, the proprietor of a small engineering workshop producing speciality product by employing 5 skilled workers is considering the introduction of some incentive scheme-either Halsey scheme or Rowan scheme-of wage payment for increasing the labour productivity to cope with the increased demand for the product by about 25%. He feels that if the proposed incentive scheme could bring about an average 20% increase over the present earnings of the workers, it would act as a sufficient incentive for them to produce more and he has accordingly given this assurance to the workers.

As a result of this assurance, an increase in productivity has been observed as revealed from the following figures for the current month:

Hourly rate of wages (guaranteed) 5.00

Average time for producing 1 piece by one worker as per the previous performance (X desires that this time be considered as time allowed for the purpose of incentive scheme) 2 hours

No. of working days in the month 25

No. of working hours per day for each worker 8

Actual production during the month 625 pieces

You are required to:

(a) Calculate effective rate of earnings per hour under Halsey scheme and Rowan scheme.

(b) Calculate the savings to X in terms of direct labour cost per piece under the above schemes.

Reference no: EM132820769

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