MAcost behaviour

If 3 minutes is the standard time per unit, then the total standard time for the total output is 200 x 3 = 600 minutes, or 10 hours. The rate is $18 per standard hour and so for 10 standard hours the pay is 10 x $18 = $180. (this is more than the guaranteed minimum of 80% x 8 x 20, and so the gross pay will be $180.)

Thanks sir

You are welcome :-)

You are welcome also :-)

Hi I still have a question about above scenario. In the question is given that the total hours worked to produce 200 pieces are 8, why is the answer is 180 (10 hours * 18)? Shouldn 't be $18 *8 =144. Isn't the pay base on the hours? Base on my understanding because the hours worked are still 8 and the qty increases, the the minutes of output is the ones that changes. (200/8=25.. items per hour) (60/25= 2.4 minutes per output) If the question would not have said that 200 pieces were produced in 8 hours, then I would fully understand the answer. If my understanding is not correct, could you please help me? Thanks Gabbi

The piecework rate is based on standard hours, not actual hours. By standard hours it means the number of hours that they expected to be worked given that each using should take a standard time of 3 minutes. So...to produce 200 units was expected to take 10 hours. So the standard hours is 10 and since they pay $18 per standard hour, this comes to $180. (It is the $20 per hour guaranteed minimum that is based on actual hours. So since they actual hours were 8, they are guaranteed to receive $160, but since the piecework wages are higher at $180 they will receive $180). It is a sensible scheme, because OK - the workers are guaranteed to earn $160. But if they work fast and produce more and more units, then the more 'standard hours' they will be paid for and therefore the more they can earn.

Thank you very much Gabbi

You are welcome, Gabbi :-)

Hi I came across below question which provided answer makes me confuse. I will write the question, provided answer and my understanding based on the above explanation. The following data relate to work in the finishing department of certain factory: Normal working day 7 hours Basic rate of pay per hour $5 Standard time allowed to produce 1 unit 4 minutes Premium bonus payable at the basic rate 60% of time saved On a particular day one employee finishes 180 units. What is his gross pay for the day? a $35 b $50 c $56 d $60 Correct answer B Standard time for 180 units (x4/60) 12 Actual time taken 7 Time saved 5 Basic pay 7 hours x$5 35 Bonus 60% x5hour saved x$5 15 Total 50 My working If 4 minutes is the standard time per unit, then the total standard time for the total output is 180 (unit produced) x 4 (minutes per unit) 180x4/60 = 12 If the basic rate per hour is $5 x 12 (total hours worked) = 60 I have used the same logic that has been applied previously posted, however it looks like I have missed some concepts. Could you please help me to understand where I am wrong. If so, could you please clarify the differences between the above questions. Apologies to keep asking on this topic, but I want to understand the question/answer and where I make the mistake. Thanks a lot Gabbi

The total hours worked are not 12. The working day is 7 hours, so they actually worked 7 hours and will be paid for 7 hours (plus a bonus). 12 hours is the standard time, i.e. the time it was expected to take.