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Our Presentation
Topic
Labor Cost
The Workforce Behind This Presentation
Name
ID
Sunayan Kanti Paul
BBA 02707063
MD. Mehedi Ali
BBA 02707102
Sayeda Amena Akhter
BBA02707050
Umme Tasnuba
BBA 02707065
MD.Mahbub Hossain
BBA 02707093
Labor Cost
Labor cost represents the human contribution to production . It is an
important cost factor requiring constant measurement, control and
analysis.
Illustration
Labor cost consists
Basic Pay
Fringe Benefits
Basic Pay : The basic pay for
work performed is called the
base rate or job rate.
Fringe Benefits : Fringe cost
contains incremental pay, holiday
pay, vacation pay, overtime
premium pay, and cost living
adjustment , must be added to the
base rate in order to arrived at
the full labor cost.
Incentive Wage Plan
Incentive wage plan is a work system where
workers can get their extra benefits for the extra
output than the standard one.
Implementation
For the succession of this plan there are some conditions and
situations where these must be applied.
SuchIn which a worker can increase output.
More pay for output above standard.
Set fair standards so that extra efforts will result in bonus pay.
Result in immediate reward every payday.
Purpose of Incentive Wage Plan
For a company or organization
 To increase output
 To reduce unit cost
 To increase efficiency ratio
of productivity
 To increase business profits
For workers
 To earn a higher wage
Types of Incentive Wage Plan
 Straight Piecework Plan : According to this
plan, workers get or organization pays wages
above the base rate for production above the
standards.
 100% Bonus Plan :The main focus of this plan
on the time instead of price per piece. The worker
is paid for the standard time at the hourly rate if the
job or unit is completed in standard time or less.
 Group Bonus Plan : This plans, like those designed for
individual incentive, are intended to encourage production at
rates above a minimum standard.
Particular Plan Under Particular Situation

Straight Piecework Plan : 4 minutes is the standard time
required for producing one unit, the standard rate is 15 pieces
per hour, workers base pay is $6.36 per hour.
Piece Rate =
Units Per
Hour
$6.36
15
= $.424
Guaranteed
Payment
Additional
Payment
Total
Payment
Labor Cost
Per Unit
12
$6.36
--
$6. 36
0.530
15
,,
--
$6. 36
0.424
19
,,
1.68
$8. 04
0.423
•100% Bonus Plan :
Hours
Effici- *
L.C.
Consu- Actual Standard ency
Base
Total
Per
Worker med
Output Output Ratio(b) Rate(a) a*b Earened Unit
X
40
540
600
. 90
Y
40
660
600
Z
40
800
600
*Efficiency Ratio =
$7.50
---
$300
$.5556
1.10
,,
---
330
$.5000
1.33
,,
---
399
$.4988
Actual
Standard
*When the efficiency ratio is above 1 then this is applicable otherwise no
bonus is earned
•Group Bonus Plan:
Here, Worker = 10
Actual hours = 80
Regular Group Wage = $800
Each is paid $10 an hour for a regular 8 hour shift
Units
Produced
Standard
Hours
Bonus (Hrs.
saved@ $10)
Total Group
Earnings
Labor Cost
Per Unit
350
70
$0
800
$2.286
425
85
$ 50
850
$2.000
Learning Curve Theory
The learning curve theory specify that
every time the cumulative quantity of
units produced is doubled, the
cumulative average time per unit is
reduced by a given percentage.
Other Stimulations
Overtime Earnings : It consists two elements sucha) The regular pay due for the employee's
work and
b) The overtime premium pay
Bonus Payment : It can be paid to employee in such
ways – fixed amount or a percentage of profits, a
fraction of one month wages or some other calculated
amount.
Vacation Pay : It is given on the vacation.
Organization for Labor Cost Accounting
and Control
Labor costing procedures involve :

The employment history of each worker – date
hired, wage rate, vacation, sickness, promotions,
tardiness and so on.

The establishment of labor time and cost
standards for comparative purpose.

Productivity in relation to type of wage payment.

The output of accomplishment of each worker.

Total labor cost in each department for each
payroll period.
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