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:
|
Hourly rate of wages (guaranteed) |
5 |
|
Average time for producing 1 piece by one worker as |
|
|
per the previous performance (X desires that this |
|
|
time be considered as time allowed for the purpose |
|
|
of incentive scheme) |
2 hours |
|
No. of working days in the month |
25 |
|
No. of working hours per day for each worker |
8 |
|
Actual production during the month |
625 pieces |
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.