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In this example, I want to know how the cents were calculated>>>80c, 83.3c, 66.7c, 10c, 50c
For example if an employee would make 100 units in a 40 hour week if they were paid $2 per hour, but
120 units if they were paid $2.50 per hour, and if production overhead is added to cost at the rate of
$2 per direct labour hour, costs per unit of output would be as follows.
(a) Costs per unit of output on the low day-rate scheme would be:
(40x $4)/100
= $1.60 per unit
(b) Costs per unit of output on the high day-rate scheme would be:
(40 x $4.50)/120
= $1.50 per unit
(c) Note that in this example the labour cost per unit is lower in the first scheme (80c) than in the
second (83.3c), but the unit conversion cost (labour plus production overhead) is higher because
overhead costs per unit are higher at 80c than with the high day-rate scheme (66.7c).
(d) In this example, the high day-rate scheme would reward both employer (a lower unit cost by
10c) and employee (an extra 50c earned per hour).I can’t keep explaining a Study Text published by someone else.
You should watch our free lectures – they are a complete course for Paper F2 – and then you don’t need a Study Text.
You should practice questions from a Revision Kit published by one of the ACCA approved publishers – they are exam standard questions.
Any problems with questions on our website or with questions from the BPP Revision Kit then I will help with pleasure.The labour cost for 40 hours in the first scheme is 40 x $20 = $80. This is for 100 units, so it is $0.80 per unit.
The overheads for 40 hours in the first scheme is 40 x $2 = $80. This is for 100 units so this is $0.80 per unit as well.It is exactly the same logic to calculate the figures for the second scheme.
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