Group Incentive Scheme - Labour Cost, Cost Accounting Video Lecture | Cost Accounting - B Com

so let's start our today's lecture it's
about GU bonus games up to this point we
have discussed individual bonus schemes
and remember the basic concept under
individual bonus schemes was time saved
and the time saved is calculated by
comparing time allowed with time taken
all right now before we learn how to do
the calculations in the book group bonus
games
let us understand why we need group
bonus schemes especially when we already
have individual bonus schemes suppose we
have two departments Department a and
Department a has four employees one -
oops two three four and under Department
B we have three employees one two three
and these two departments are working
together that means they are working as
one unit to produce a single piece of
cellphone okay what I meant to say is
that they are making a collective effort
that means all seven employees come
together to produce one unit of
cellphone so how it must have been
happening the raw material must have
been received by Department a all four
employees must have done some kind of
process on it and then whatever the
output was was sent to Department B and
then to three employees of Department B
must have processed even further and
then we had a finished cellphone unit
now in this situation as per what we
as per individual schemes I am required
to maintain a record of time allowed and
time taken by each of these seven
individuals of these two departments
separately that means I have I will
maintain seven different files of record
in order to calculate the bonus each
individual is entitled to at the end of
the period or at the end of a project
now imagine we have hundreds of
employees in the department a and
hundreds of employees and Department B
and then I have to maintain that record
for every individual separately you are
understanding the amount of
administrative task that is required to
do this right so it's not easy rather I
will not be wrong if I say it's almost
impossible in certain cases so now that
we have understood that individual bonus
schemes are difficult to maintain and
can be a headache for administration do
we really have a solution for this
well answer is yes we do have a solution
in the form of group bonus schemes or
some books call it or as Noah or it is
also called as group incentive schemes
now remember under individual bonus
schemes I was calculating bonus for
every individual separately and that
requires maintaining record of time
allowed and time taken by every employee
separately under group bonus games
instead of calculating bonus for every
individual
we get a great bonus for cost centers
collectively how let's understand that
with the with the same example that we
have on the whiteboard like Department a
and Department B
was working together to make one cell
phone right now instead of calculating
bonus for these seven employees
separately what I will do is I will take
these two production centers department
a and Department B as one unit because
these two departments are working
together to make one product so what I
have done is I have grouped the
different departments or different
employees as one okay and then I will
compare or I will maintain the record
that how much time this group is allowed
and how much time this group has taken
okay in simple words I will have the
amount of time saved by the whole group
instead of each individual this is much
easier to maintain much easier to
control and much easier to account for
as well how let's get in a little more
detail in it in case of individual bonus
schemes I I will have to dictate every
individual separately that okay if you
are going to produce this much you will
have this much time and if you save you
will get this much bonus now in case of
group bonus schemes I will call the
production supervisors of department a
and Department B and tell them that both
of you have this much amount of time now
definitely it will have some
disadvantages and advantages also but
that's not part of our syllabus we are
here to discuss only the calculation of
group bonus games okay so now that we
have understood the concept or the
reason why we have group bonus games
and why they can't be better for us as
compared to individual bonus schemes
let's move on and let's have a look at
one question which will help us
understand how the calculation is done
so please go through the question read
it and then I will discuss it and do it
on the whiteboard so let's read this
question together
Yeti Electric is launching an innovative
product it comes in two variants freeze
breeze and hot frost okay interesting
names the later can operate as room
heater also manufacturing of two units
require different departments to work
together following details are available
for each department so we have four
departments molding assembly packing and
inspection and we are given with the
details of number of workers under each
department the pay that they are being
given per hour and the are spent by each
worker okay that's an important part
this is work this is the are spent by
each individual not seven of them but by
each individual so we will have to
multiply seven with 50 and so on okay
output of the most recent week is
following product freeze breeze we have
produced two thousand twenty four units
the standard time allowed in minutes is
forty five and hot frost inner producer
1680 and this the standard time allowed
for making money unit is 70 minutes if
any overtime is worked it is paid on
rate and a half basis okay rate and a
half means whatever the rate is being
given on hourly basis this one and fifty
percent in additional that means
overtime premium is 50 percent
management
as recently introduced a group incentive
scheme under which are saved by
departments collectively are paid at 80
percent of normal
hourly rate so whatever the time is
saved the reward is 80 percent of the
time of the saved RS the incentive is
shared between departments
proportionately on the basis of ours
work by each department okay now we will
explain that later standard weekly RS
are 42 okay so now that we have the
standard weekly time we will compare it
with the are spent by each individual or
by each individual of each department to
calculate the overtime
anyways so calculations the requirement
is basic way of moulding department and
overtime pay of assembly department
overtime premium of packing department
and gross pay of inspection department
okay so we have four departments and we
have four different requirements for
each of these four departments so let's
quickly make the calculations let's just
make this red line so we have so first
requirement basic pay of molding
department well that's a simple question
we have a number of workers which are
seven and the pay that we are paying the
basic pay the same six point five zero
this is the basic pay so six point five
zero multiplied by the number of are
spent by each individual which is 50
remember in order to calculate basic pay
we are calculating on actual hours of
work the basis okay if you don't
you are not clear about that please go
and watch the earlier lectures it's
really important that we understand that
basic pay is calculated on actual ARS
work the basis so again we have several
workers in the moulding department each
individual is being paid at $6 50 cents
every R and every individual has worked
50 hours so it gives us two thousand two
hundred and seventy-five simple as that
moving on to assembly Department
now when I say overtime pay what I mean
or just for recap it basically means
basic pay plus overtime premium but
basic pay for what only for overtime RS
right so for assembly Department every
individual has worked for sixty six
hours now in order to calculate overtime
ours we have to find out how many dis
large over standard time individuals are
working so that's really simple one we
have sixty six RS as per the question
standard time allowed weekly is 42 so
that gives us 24 so every individual is
working 24 hours in addition to standard
time so 24 hours our overtime ours now
basic pay
for overtime ours 24 into number of
employees which is 18 and 7.40 okay
remember 24 is the number of additional
ARS above standard time per week 18 is
the number of employees and per hour pay
is 7.40 for assembly department so
they'll give this gives us 3196 almost
197 but this is basic pay in order to
calculate I'm pay we have to add whole
time premium in it also so overtime
premium again overtime ours multiplied
by number of employees 18 and remember
on a rate and a half basis that means
whatever the rate is and 50 percent of
it is overtime premium so 50 percent of
seven point four zero is our overtime
premium so let's just point four zero
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multiplied by 0.5 okay so we have one
thousand five hundred and ninety eight
point four so overtime pay will be the
sum of it which is season one hundred
ninety six point eight plus one oops one
five nine eight point four four thousand
seven and n95 this is the overtime pay
for department assembly now then
next requirement is overtime premium for
packing Department again in order to
calculate overtime premium I need
overtime ours so each individual is
working 60 TRS standard time is 42 this
gives us 21 hours of overtime work so 21
multiplied by number of employees which
is 12 5.50 is the basic rate of pay and
overtime premium as we already know is
50% of basic rate of pay so 5.5 0
multiplied by 0.5 and this gives us
total of six ninety three which is
overtime premium for department packing
okay now moving on to gross pay which is
actually the topic of today now in order
to calculate gross pay remember gross
pay is basic pay plus overtime premium
oops
ah premium plus bonus pay okay
so let's do this step by step basic pay
is really simple we will take the actual
ours worked multiply it with the number
of employees multiply it with the rate
and we have the total all right then we
have overtime premium now in order for
overtime premium again we have to
convert the overtime ours so 74 minus 42
this gives me 32 32 multiplied by number
of employees multiplied by rate which is
8 and 50 percent of it is the overtime
premium so this gives me 128 right bonus
pay now again now this is a little
technical one in this question we are
not given how much bonus individual can
receive ok the policy was for whole
group for all of the four departments in
totality so we have to calculate the
bonus for whole four departments first
and then as per the requirement of the
question the bonus will be divided on
proportionate basis and the basis that
we will use for procreation is the basis
of ours worked by each department so
let's see how this is done first of all
we need to calculate the RS of work by
all four departments together seven
employees number of hours
by is employed 50 and we have 18
numberphile 12 1666 4e 12 63 and then we
have one in 274 okay so let's make a
total of 8 350 plus 1 1 8 8 plus 1 5 6
and 74 this gives us 2368
so this is the total amount taken in
ours by all four departments now let's
calculate how much time was actually
allowed for the same amount of
production we produce two thousand two
two thousand twenty-four units and for
each unit 45 minutes for allowed so this
gives us 90 one thousand eighty minutes
and in order to convert it into ours
will divide it over 60 s that gives us
105 + n 18 next hot frost 1016 and M 80
units were produced each unit is
supposed to take 70 minutes this is the
number the total amount of minutes
available converted into ours and this
is 1960 now the total for total for this
is 1518 plus 196 zero season 4 and then
78 so the production for which 3478 were
ours were allowed the same production
was done in 2368 ours
loads of ours are saved here let's
calculate how much exactly 1110 ours
were saved
okay now remember these ours are saved
by all four departments or in other
words the employees working in all four
departments together ok and I have to
find out how much belongs to inspection
department only now this is where again
the question is helping me and is saying
that the incentive is shared between
departments proportionately on the basis
of ours worked by each department okay
so well that means what that mean is the
inspection department had a total
contribution of 74 ours in 2000 and 368
okay and if I multiplied it with the are
saved it will give me we are saved by
inspection development so one thousand
one hundred thirty four point six six
and five this is the amount of ours
saved by or that our that inspection
department is entitled okay so
thirty four point six nine if I make it
thirty four point six nine ours how many
number of employees we have one and at
what rate are we paying this bonus again
in the question we have the answer and
that is group incentive
which are saved by the department
collectively are paid at 80 percent of
normal
Arlie rate now the normal Elliott is 8
so 80% of this $1 is the reward as bonus
for the employees of this department so
$8 multiplied by 0.8 and this gives me
triple to point something okay so gross
pay will be the sum of all these three
mounds 592 plus 128 plus tuple 2 and
this gives me nine hundred and forty two
dollars so this is the gross pay of one
individual because we have only one
worker under Department inspection so
this is the cross pay of that individual
all right so this is the group owner
schemes and this is how the calculation
K is done