MGT402 Cost & Management Accounting Assignment 1 Solution

Assignment
Hibco & Partners, a Quebec-based public accounting partnership, specializes in audit services. Its job-costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (audit support, which contains all costs of the Audit Support Department). Audit support costs are allocated to individual jobs using actual professional labor-hours. Hibco & Partners employs 3 professionals to perform audit services. Management of the company has provided different categories of bonus. It can fixed different level of bonus according to minimum time utilization on job.
The standard time for the completion of a certain job is fixed at 50 hours. Normal wages are paid to the workers according to time rate, which is Rs.20 per hour. The plan of payment of bonus is as under:
For 1st 10% saving in time 20% of time saved
For next 30% saving in time 40% of time saved
For next 20% saving in time 30% of time saved
For balance 5% of time saved
REQUIRED:
1. Compute total earning of Mr. X, Mr. Y and Mr. Z.
2. Mr.X worked 55 hours, Mr.Y worked 40 hours and last Mr. Z worked For 15 hours of professional labor time. Compute the per hour earning of each of professional using bonus rate by segregating them into categories. Explain who worked more efficiently.
3. Why the total earning of employee’s job decrease while an employees worked more efficiently than others (completed task in minimum time).

Solution:

Total earning of MR X

Working completion hours Mr. X is = 55

But fixed for job only 50hours @ 20

So he will be paid 50×20                = Rs.1000

Total earning of MR Y

Working hours(40) wages 40×20 = 800

His Working hours 40 out of 50hours

Saving in time 10hr out of 50hr so, = 50×40/100= 20% saving of time

First 10% saving hours        = 5×04 = Rs.20

For next 10% saving hours = 5×08 = Rs.40

                                                           Rs.60

Wages for working hours= 800

Add bonus of Rs.              =     60

Total earning of Mr Y     = 860

Total earning of MR Z

wages 15hoursx20 = 300

His Working hours 15 out of 50hours

Saving in time 35hr out of 50hr so, = 35×100/50= 70% saving of time

First 10% saving hours = 5×04 =           Rs.20

For next 30% saving hours = 15×08 = Rs.120

For next 20% saving hours = 10×06 = Rs.60

For balance (10%)out of 70%=5×01= Rs. 05

                                 Bonus              Rs.205

Wages for working hours= 300

Add bonus of Rs.              =  205

Total earning of Mr Z     = 505

Answer 3: It attributes the job losses to employers increasing prices to deal with the higher wages , which would lower demand and therefore their need more workers as well as to some employers substituting machines or technology for workers  due to the higher cost of wages

But business may respond to a higher and policy research, john Schmitt argues that they can benefit from improved efficiency and lower turnover a higher wages may lead employers to push ,the majority to work harder ,which can be preferable to cutting hours or workers . in fact ,the majority of fast food restaurants in Georgia and Alabama said they would respond to a minimum wages increase with higher performance standards

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