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Variable cost

This topic has 3 replies, 2 voices, and was last updated 3 months ago by John Moffat.

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October 8, 2018 at 1:10 pm #476820
rihaam
Member
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Under which of the following labour remuneration methods will direct labour cost always be a variable cost?
a. Day rate
b. Piece rate
c. Differential piece rate
d. Group bonus scheme
The answer given is piece rate but I didn’t get the reason behind it.Need ur guidance. Thanks
October 8, 2018 at 6:08 pm #476845
John Moffat
Keymaster
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Piece rate is where labour is paid based on the number of items produced. So it is truly variable – more items means more pay, and fewer items means lesser pay.
December 31, 2024 at 5:18 am #714359
jj-bobo
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what can’t it be differential piece rate though?
January 1, 2025 at 3:27 pm #714367
John Moffat
Keymaster
- Topics: 57
- Replies: 54648
A differential rate means that the rate per item shanges with the number of items. So although the total cost will vary it will not vary linearly and so will not be classed as being a truly variable cost.
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