Question:
X, the proprietor of a small engineering workshop producing specialty product by employing 5 skilled workers is considering the introduction of some incentive scheme-either Halsey scheme or Rowan scheme-of wage payment for increasing the labour productivity to cope with the increased demand for the product by about 25%. He feels that if the proposed incentive scheme could bring about an average 20% increase over the present earnings of the workers, it would act as a sufficient incentive for them to produce more and he has accordingly given this assurance to the workers.
As a result of this assurance, an increase in productivity has been observed as revealed from the following figures for the current month:
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Hourly rate of wages (guaranteed)
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5
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Average time for producing 1 piece by one worker as
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per the previous performance (X desires that this
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time be considered as time allowed for the purpose
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of incentive scheme)
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2 hours
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No. of working days in the month
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25
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No. of working hours per day for each worker
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8
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Actual production during the month
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625 pieces
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You are required to:
(a) Calculate effective rate of earnings per hour under Halsey scheme and Rowan scheme.
(b) Calculate the savings to X in terms of direct labour cost per piece under the above schemes.
(c) Advise X about the selection of the scheme to fulfill his assurance.