Employee cost and direct expenses
Sir what is the logic for bonus of Rowan premium plan formula
As per Rowan plan standard time and the rate per hour is fixed. - time taken by the worker > standard time : Pay = time wages (i.e. time taken x rate per hour). - time taken by the worker = standard time : Pay = time wages (time taken x rate per hour) - time taken by worker < standard time : Pay = time wages +Bonus Bonus = (Time saved / Standard time) x time wages Under the Halsey Plan, bonus is usually set at 50% of the time saved. It does not serve as a strong incentive. On the other hand under the Rowan Plan, bonus is that proportion of the wages of the time taken which the time saved bears to the standard time. It serves as a strong incentive for increasing the efficiency. The effective labour rate per hour in the Rowan Plan is higher upto 50% of the time saved and falls thereafter whereas in the Halsey Plan, the effective labour rate per hour is lower upto 50% of the time saved and can be doubled thereafter. Usually, workers are not able to save more than 50% of the time allowed, so workers prefer the Rowan Plan for earning more wages.
Abnormal idle time cost is not included as a part of production cost and is shown as a separate item in the Costing Profit and Loss Account. The objective of transferring wages of abnormal idle time to Costing Profit and Loss Account is to have meaningful comparison of cost of production at different times by keeping away abnormal wages from cost of production.