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IM4.5 Intermediate: Preparation of the wages control account plus an evaluation of the impact of a proposed piecework system. One of the production departments in
IM4.5 Intermediate: Preparation of the wages control account plus an evaluation of the impact of a proposed piecework system. One of the production departments in A Ltd's factory employs 52 direct operatives and nine indirect operatives. Basic hourly rates of pay are 14.40 and 11.70, respectively. Overtime, which is worked regularly to meet general production requirements, is paid at a premium of 30 per cent over basic rate. The following further information is provided for the period just ended: Hours worked: Direct operatives: Total hours worked 25520 hours Overtime hours worked 2120 hours Indirect operatives: Total hours worked 4430 hours Overtime hours worked 380 hours Production: Product 1, 36000 units in 7200 hours Product 2, 116000 units in 11600 hours Product 3, 52800 units in 4400 hours Non-productive time: 2320 hours Wages paid (net of tax and employees' National Insurance) Direct operatives 293865 Indirect operatives 41577 The senior management of A Ltd is considering the introduction of a piecework payment scheme into the factory. Following work study analysis, expected productivities and proposed piecework rates for the direct operatives, in the production department referred to above, have been determined as follows: Piecework rate Productivity (output per hour) (per unit) Product 1 66 units 3.00 Product 2 12 units 1.50 Product 3 14.4 units 1.20 Non-productive time is expected to remain at 10 per cent of productive time and would be paid at 10.50 per hour. Required: (a) Prepare the production department's wages control account for the period in A Ltd's integrated accounting system. (Ignore employers' National Insurance.) (9 marks) (b) Examine the effect of the proposed piecework payment scheme on direct labour and overhead costs (11 marks) ACCA Cost and Management Accoun ting 1 IM4.5 Intermediate: Preparation of the wages control account plus an evaluation of the impact of a proposed piecework system. One of the production departments in A Ltd's factory employs 52 direct operatives and nine indirect operatives. Basic hourly rates of pay are 14.40 and 11.70, respectively. Overtime, which is worked regularly to meet general production requirements, is paid at a premium of 30 per cent over basic rate. The following further information is provided for the period just ended: Hours worked: Direct operatives: Total hours worked 25520 hours Overtime hours worked 2120 hours Indirect operatives: Total hours worked 4430 hours Overtime hours worked 380 hours Production: Product 1, 36000 units in 7200 hours Product 2, 116000 units in 11600 hours Product 3, 52800 units in 4400 hours Non-productive time: 2320 hours Wages paid (net of tax and employees' National Insurance) Direct operatives 293865 Indirect operatives 41577 The senior management of A Ltd is considering the introduction of a piecework payment scheme into the factory. Following work study analysis, expected productivities and proposed piecework rates for the direct operatives, in the production department referred to above, have been determined as follows: Piecework rate Productivity (output per hour) (per unit) Product 1 66 units 3.00 Product 2 12 units 1.50 Product 3 14.4 units 1.20 Non-productive time is expected to remain at 10 per cent of productive time and would be paid at 10.50 per hour. Required: (a) Prepare the production department's wages control account for the period in A Ltd's integrated accounting system. (Ignore employers' National Insurance.) (9 marks) (b) Examine the effect of the proposed piecework payment scheme on direct labour and overhead costs (11 marks) ACCA Cost and Management Accoun ting 1
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