Business Daily from THE HINDU group of publications
Monday, Sep 24, 2007
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Business Daily from THE HINDU group of publications Monday, Sep 24, 2007 ePaper |
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Mentor
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Accountancy Calculation of piecework-based earnings
P. V. Ratnam A factory has a piecework scheme for mass production of a certain component for a TV manufacturer. The standard production fixed for a day of eight hours is 40 units. The piecework rate is Rs 4 per piece. The details of remuneration payable to the workers are as shown in Table 1. The performance data of three workers Ram, Salim and Tom for May 2007 is presented in Table 2. 
Calculate their total earnings. 
Solution: The efficiency and total earnings statements are presented in Tables 3 and 4. Machine Hour RateCalculate the comprehensive machine hour rate of a machine from the following: Cost of the machine Rs 25 lakhs, having a scrap value of Rs 1 lakh after 10 years. The machine will be operated for three shifts of seven hours each for 300 working days in a year of which 300 hours will be utilised for minor repairs and maintenance. Wages payable: Rs 8,000 pm for an operator and Rs 3,000 pm for a helper for every shift. Rs 16,000 pm to one supervisor per shift for the department accommodating four machines including the above machine. Other details: Power consumption — 25 units (KWH) @ Rs 4.80 per unit; repairs and maintenance — Rs 30,000 per annum; general lighting and heating — Rs 4,000 p.m. for the whole department having the four machines; insurance — Rs 18,000 per machine per annum; rent, rates and taxes — Rs 3,000 pm for the department; factory overheads — Rs 36,000 per annum for the department. Solution: Working hours in a year (7 x 300) = 2100 x 3 shifts = 6,300 – 300 = 6,000 hours. The calculation of comprehensive machine hour rate is presented in Table 5. CVP analysisA company has a contribution/sales ratio of 40 per cent. It maintains a margin of safety of 20 per cent. If its annual fixed costs amount to Rs 24 lakh calculate its: breakeven sales, margin of safety, total sales, total variable costs; and profit. Solution: The break-even sales= F/CS Ratio 24 lakh/40 per cent = Rs 60 lakh ii) Sales = BEP + Margin of safety S = 60 lakh + 20 per cent of sales S - 0.20 S = 60 lakh 0.80 S = 60 lakh S = 60 lakhs/0.8 = Rs 75 lakh Margin of safety = 20 per cent of 75 lakh = Rs 15 lakh iii) Total sales = Rs 75 lakh (as worked out above) iv) Total variable cost 100 per cent – 40 per cent = 60 per cent of 75 lakh = Rs 45 lakh. v) Profit = (S x PV) – F (75 lakh x 40 per cent) – 24 lakh 30 lakh – 24 lakh = Rs 6 lakh More Stories on : Accountancy | Education
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