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question on labour costs

Forums › ACCA Forums › ACCA MA Management Accounting Forums › question on labour costs

  • This topic has 0 replies, 1 voice, and was last updated 10 years ago by teboho.
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  • May 8, 2015 at 9:39 am #244773
    teboho
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    • Topics: 3
    • Replies: 1
    • ☆

    a company manufactures a single product. currently, the company employs a team of 6 direct operatives who produce a total of 2500 units of the product in a 40 hour week. the hourly rate of pay for all operatives is 8 eoros.

    in an effort to improve productivity, and thus to increase output in the normal 40 hour week, an incentive scheme has been suggested. the scheme, which the 6 operatives hav agreed to trial over a 4 week period, provides a differential piecework payment in addition to a reduced basic rate per hour. details of the scheme are:

    basic hourly rate 4 euros/ hour

    differential piecework rates
    1st 2500 units of output in a week 0.375/ unit

    output 2501 to 3000 units in a week 0.45/ unit on additional units over 2500
    output over 3000 units in a week 0.60/ unit on additional units over 3000

    in the 1st week of the trial, total output was 3080 units in the 40 hours worked

    required:
    (a)…
    (b) for the incentive scheme, calculate:

    (i) the labour cost/ unit, based on the 1st week of the trial;

    (ii) the level of output in a 40 hour week at which total labour cost would be the same as under the existing time rate payment system

    could u help me with (i) (ii) of this question

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