Calculation of earnings and a discussion of time-based and individual performancebased remuneration systems

(a) Describe the characteristics of factory direct and indirect labour cost and explain the treatment of factory overtime wages and holiday pay in cost accounting systems. (9 marks)

(b) A Ltd makes engineering components. The company has been manufacturing 6000 components per week, with six direct employees working a 40-hour week, at a basic wage of £4.00 per hour. Each worker operates independently.

A new remuneration scheme is being introduced.

Each employee will receive payment on the following basis:

There will be a guaranteed minimum wage of £140 per week. It is expected that output will increase to 6600 components per week with the new scheme.
Required:
Describe the general features of time-based and individual-performance-based remuneration systems, and outline the relative merits of each type of system. (Use the above figures to illustrate your discussion, making whatever additional assumptions that you feel are necessary. )LO1

Transcribed Image Text:

first 800 components per week-16 pence per unit next 200 all additional 17 18