Indus Limited produces a product that passes through two processes. The management is worried about the...

 

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Indus Limited produces a product that passes through two processes. The management is worried about the high rate of wastage attributed to workers and has decided to introduce a wage incentive plan to address this issue. The data collected in this respect is as follows: Process A Process B Cost of material (Rs. per unit) 1,000 700 Labour hours required per unit 2 3 Labour (Rs. per hour) 200 250 Variable overhead rate (Rs. per hour) 120 120 Wastage percentage in relation to total units produced 10% 5% The units are inspected at the end of the process. Each worker works 240 hours every month. Under the incentive plan, the management intends to allocate the cost savings from wastage, among the workers in the form of bonus. Required: Determine the bonus amount to be provided to a worker for every one percent decrease in the wastage percentage. (08) Indus Limited produces a product that passes through two processes. The management is worried about the high rate of wastage attributed to workers and has decided to introduce a wage incentive plan to address this issue. The data collected in this respect is as follows: Process A Process B Cost of material (Rs. per unit) 1,000 700 Labour hours required per unit 2 3 Labour (Rs. per hour) 200 250 Variable overhead rate (Rs. per hour) 120 120 Wastage percentage in relation to total units produced 10% 5% The units are inspected at the end of the process. Each worker works 240 hours every month. Under the incentive plan, the management intends to allocate the cost savings from wastage, among the workers in the form of bonus. Required: Determine the bonus amount to be provided to a worker for every one percent decrease in the wastage percentage. (08)