Incentive Wage Plans (CPA, adapted) During your audit of the accounts of the Gelard Manufacturing Corporation of Singapore, your assistant tells you that he has found errors in the computation of the wages of factory workers and he wants you to verify his work.

Your assistant has extracted from the union contract the following description of the systems for computing wages in various departments of the company. The contract provides that the minimum wage for a worker is his base rate, which is also paid for any “downtime”—time when the worker’s machine is under repair or he is without work. The standard workweek is 40 hours.

The union contract also provides that workers be paid 150 percent of base rates for overtime production. The company is engaged in interstate commerce.

1. Straight precework. The worker is paid at the rate of $.20 per piece produced.

2. Percentage bonus plan. Standard quantities of production per hour are established by the engineering department. The worker’s average hourly production, determined from his total hours worked and his production, is divided by the standard quantity of production to determine his efficiency ratio. The efficiency ratio is then applied to his base rate to determine his hourly earnings for the period.

3. Emerson Efficiency System. A minimum wage is paid for production up to 6673 percent of standard output or “efficiency.” When the worker’s pro-duction exceeds 667/, percent of the standard output, he is paid at a bonus rate. The bonus rate is determined from the following table:

EFFICIENCY BONUS Up to 6674% 0%

6624-79% 10%

80-99% 20%

100-125% 45%

Your assistant has prepared the following schedule of information pertain- ing to certain workers for a weekly payroll selected for examination:

GROSS DOWN- WAGES WAGE INCENTIVE TOTAL TIME UNITS STANDARD BASE PER WORKER PLAN HOURS HOURS PRODUCED UNITS RATE BOOKS Long Straight piecework 40 5 400 — $1.80 $ 82.00 Loro Straight piecework 46 — 4552 — 1.80 91.00 Huck Straight piecework 44 4 420» _ 1.80 84.00 Nini Percentage bonus plan 40 = 250 200 2.20 120.00 Boro Percentage bonus plan 40 - 180 200 1.90 67.00 Wiss Emerson 40 = 240 300 2.10 92.00 Alan Emerson 40 2 590 se 2.00 118.00

@ Includes 45 pieces produced during the 6 overtime hours.

» Includes 50 pieces produced during the 4 overtime hours. The overtime, which was brought about by the ‘‘downtime,’’ was necessary to meet a production deadline.

¢ Standard units for 40 hours’ production.

required Prepare a schedule comparing each individual’s gross wages per books and his gross wages per your calculation. Computations of workers’ wages should be in good form and labeled with the workers’ names. lop5