QUESTION FOUR LABOUR COST The following information relates to Maximax Ltd. It is a manufacturing business that is considering the introduction of a piece-work incentive scheme in one of its departments, which has 6 employees. Current Payroll scheme: Basic working week: 38 hours Over-time premium: 20% of normal basic pay grade rate. Normal grade A basic pay rate: K22 per hour. Normal grade B basic pay rate: K18 per hour. Employee Total hours worked Basic pay grade Normal units produced 1 2 3 4 5 6 41 44 40 38 38 45 A A B B B A 170 170 150 150 150 180 Piecework Incentive Scheme Proposal Under the proposed piecework incentive scheme, the standard time allowance would be 20 minutes per unit. The piecework rate would be based on grade A basic hourly rates, with a standard piecework enhancement of 6%. All employees would receive the same piecework rate. Required: (a) Outline the purpose of an incentive scheme. [6 Marks] (b) Calculate the gross pay due to each employee based on the current payroll terms. [6 Marks) (c) Calculate the standard piecework rate on the basis of the proposed piecework incentive scheme. [6 Marks] (d) Calculate the gross pay due to each employee under the terms of the proposed incentive scheme. [6 Marks) [SUBTOTAL: 24 MARKS]