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MHR 523 Chapter Notes - Chapter 12: Piece Work, Worldatwork, Merit Pay

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bronzepig36
23 Jul 2016
School
Ryerson University
Department
Human Resources
Course
MHR 523
Professor
Oxana Svergun

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Document Summary

Chapter 12: pay for performance and financial incentives. Fixed pay: compensation that is independent of the performance level of the individual, group, or organization. Variable pay: any plan that ties pay to productivity or pro tability. Piecework: a system of pay based on the number of items processed by each individual worker in a unit of time, such as items per hour or items per day. Straight piecework plan: a set of payment for each piece produced or processed in a factory to shop. Guaranteed piecework plan: the minimum hourly wage plus an incentive for each piece produced above a set number of pieces per hour. Differential piece-rate plan: a plan by which a worker is paid a basic hourly rate plus an extra percentage of his or her base rate for production exceeding the standard per hour or per day. It is similar to piece work payment but it is based on a percentage premium.

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Related Questions

1. Ben Lieber is a waiter at Harbor House, where he receives aweekly wage of $81.20 plus tips for a 40-hour workweek. Lieber'sweekly tips usually range from $275 to $390.

Round your answers to the nearest cent.

a. Under the Fair Labor Standards Act, theminimum amount of wages that Lieber must receive for a 40-hourworkweek is

2. Carrie Overwood works fluctuating work schedules. Besides herfixed salary of $1,051 per week, her employment agreement providesfor overtime pay at an extra half-rate for hours worked over 40.This week she worked 48 hours. Compute the following amounts.

Round all divisions to two decimal places and use the roundedamounts in subsequent computations. Round your final answers to thenearest cent.

a. The overtime earnings
b. The total earnings

c. If this was a BELO plan with a pay rate of$23.45 per hour and a maximum of 48 hours, how much would Overwoodbe paid for 44 hours?

3. During the first week in November, Erin Mills worked 43.00hours and produced 1,217 units under a piece-rate system. Theregular piece rate is $0.32 a unit. Mills is paid overtimeaccording to the FLSA ruling for overtime work under a piece-ratesystem. Compute the following amounts.

Round all divisions to two decimal places and use the roundedamounts in subsequent computations. Round your final answers to thenearest cent.

a. The piecework earnings
b. The regular hourly rate
The overtime hourly rate
c. The overtime earnings
d. The total earnings

4. Jill Connor is employed as a salesperson in the men'sdepartment of Fashion Line. In addition to her weekly base salaryof $349, Connor is paid a commission of 2% on her total net salesfor the week (total gross sales less any customer returns). Duringthe past week, to promote the sale of its fine cashmere sweaters,Fashion Line agreed to pay Connor an additional PM (push money) of3% of the total net sales of cashmere sweaters. Connor's weeklysales tally is given below.

Item Gross Sales Customer Returns
Regular sweaters $391 $55
Cashmere sweaters 1012 74
Ties 177 0
Dress shirts 449 38
Sports shirts 199 29

Compute Connor's total weekly earnings, showing her (a) weeklybase salary, (b) commission, (c) PM, and (d) total weekly earnings.Round your intermediate and final answers to the nearest cent.

a. Weekly base salary:
Weekly gross sales
Less customer returns
Weekly net sales
b. Commission: $ × 2%
Weekly gross sales of cashmere sweaters
Less customer returns
Weekly net sales of cashmere sweaters
c. Push money (PM): $ × 3%
d. Total weekly earnings

Based on following text in your own words, list anddefine the four categories of employment income,providing an example (other than regular pay) foreach category.

Employment Income

An individual working for an employer receives compensation orpay, known as remuneration, for the services they perform. Where anemployee-employer relationship exists, remuneration is referred toas employment income. Employment income can be categorized intoearnings, allowances, benefits and taxable expensereimbursements.

Earnings

Earnings are dollar amounts the employer pays an employee forthe work they perform. Earnings can be paid as:
· a salary
· a rate for each hour worked
· a rate per piece of goods produced or picked
· a disability payment for time off work due to illness
· a payment for vacation time
· a premium payment for overtime hours worked
· a premium payment for hours worked on shift

Deciding which types of earnings are paid and how they arecalculated is primarily a decision made by the employer. Earningsare pensionable, insurable and taxable, and therefore subject toall statutory deductions.

Allowances

Allowances are additional dollar amounts paid to employees forthe use, or anticipated use, of their personal property forbusiness purposes. Allowances can also be provided to employees tocover the cost of personal living expenses associated withemployment. The most common types of allowances cover the costsincurred by the employee for car, meals, uniforms, safety shoes orother particular types of clothing for business reasons. Undercertain conditions, allowances are not considered employment incomeand therefore are not subject to statutory withholdings.

Benefits

Benefits are dollar values attributed to something the employerhas either provided to an employee or paid for on an employee’sbehalf. Usually, when an employer provides an employee withsomething (for example, a company-leased automobile is given to theemployee for both business and personal use) or pays for somethingon an employee’s behalf (for example, group term life insurancepremiums), it results in a benefit to the employee. There arecertain situations where benefits are not included in employmentincome and therefore are not subject to statutory withholdings.

Expense Reimbursements

Similar to allowances, expense reimbursements are also dollaramounts paid to employees to cover expenses that they incur whileperforming their job. For the most part, expense reimbursementsgenerally fall outside of payroll because they are business-relatedand therefore not employment income to employees. These expensesare claimed on an expense report, supported by receipts, andusually submitted directly to the accounting department forreimbursement. As such, they are not considered in the calculationof an employee’s pay. Some organizations choose to reimburseexpenses through payroll in which case they are not subject to anystatutory deductions; they will, however, affect the net pay. Anyreimbursements made to an employee for personal living expenses areconsidered taxable to the employee, included in income and subjectto statutory withholdings.

9.27 Direct cost and overhead variances; decision to automatePlush pet toys are produced in a largely automated factory instandard lots of 100 toys each. A standard cost system is used tocontrol costs and to assign cost to inventory. Price standardQuantity standard Plus fabric $2 per metre 15 metres per lot Directlabour $10 per hour 2 hours per lot Variable overhead, estimated at$5 per lot, consists of miscellaneous items such as thread, avariety of plastic squeakers, and paints that are applied to createfeatures such as eyes and whiskers. Fixed overhead, estimated at$24 000 per month, consists largely of depreciation on theautomated machinery and rent for the building. Variable overhead isallocated based on lots produced. The standard fixed overheadallocation rate is based on the estimated output of 1000 lots permonth. Actual data for last month follow. Production 2,400 lotsSales 1,600 lots Plus fabric purchased 30,000 metres Cost of fabricpurchased $62,000 Fabric used 34,000 metres Direct labour 4,200hours Direct labour cost $39,000 Variable overhead $12,000 Fixedoverhead $24,920 The entity’s policy is to record materials pricevariances at the time materials are purchased. Required (a)Calculate the commonly used direct cost and overhead variances. (b)Management is considering further automation in the factory.Robot-controlled forklifts could reduce the standard direct labourper lot to 1.5 hours. (i) Estimate the savings per lot that wouldbe realised from this additional automation. (ii) Assume thecompany would be able to generate the savings as calculated.Considering only quantitative factors, calculate the maximum pricethe managers would be willing to pay for the robot-controlledforklifts. Assume the company’s management requires equipment coststo be recovered in five years, ignoring the time value of money.15.16 Big Bertram uses the just-in-time method to manufacture golfclubs. The manufacturing schedule for the clubs is developed ascustomers place orders. Each club is made within a cell where fiveworkers have production stations. The raw materials are deliveredto the cell as needed. Each worker in the cell performs one step inthe manufacturing process and then inspects the club before givingit to the next person. When a club is finished, it is set on afinished goods rack, which is sent to the packaging department atregular intervals. Required (a) What do we call a manufacturingsystem such as the one used by Big Bertram? (b) Describe generaladvantages of this type of system. (c) The supplier thatmanufactures the weights that are inserted in each club head wouldlike to monitor Big Bertram’s inventory levels through the internetso that its new software program could release deliveries atappropriate times. List qualitative factors that might affect BigBertram’s decision about this proposal.