Cost Ascertainment - Labour Cost

1. Classification of Labour Cost

• Direct Labour: Wages paid to workers directly engaged in transforming raw materials into products (e.g., assembly line workers).
• Indirect Labour: Wages paid to auxiliary support staff (e.g., security, maintenance, and cleaning crews).

2. Methods of Remuneration

1. Time Rate System: Workers are paid based on hours worked, regardless of output.
   • $\text{Wages} = \text{Hours Worked} \times \text{Hourly Rate}$
2. Piece Rate System: Workers are paid based on units produced, regardless of time spent.
   • $\text{Wages} = \text{Units Produced} \times \text{Rate Per Unit}$

3. Incentive Wage Plans

• Halsey Premium Plan: Worker receives guaranteed time rate wages, plus a premium of 50% of the time saved.
  • $\text{Total Earnings} = (T \times R) + [0.50 \times (S - T) \times R]$ (Where $T$ = Time taken, $S$ = Standard time allowed, $R$ = Hourly rate)