Labour costs: five questions to try now
Real past-paper questions, the answer key from the mark scheme, and the explanation that goes with it. No account needed to answer them.
Question 1
Anna is paid an hourly rate for each hour worked. She also receives an additional $0.25 for every unit produced in excess of 200 units a week.
Which method of labour remuneration is used to pay Anna?
Answer: B.
Anna is paid a fixed hourly rate for her time plus an extra amount only once output passes a target of 200 units, which is the standard shape of a bonus scheme, so B. A is wrong because she plainly earns more than the hourly rate when she beats the target. C is wrong because commission is a percentage of sales value, not a payment per unit produced. D is wrong because a piece rate pays for every unit made from the first one, whereas Anna's extra payment only starts above 200 units.
Question 2
An employee works a standard 40-hour week. In that time he is expected to make 200 complete units.
He is paid a bonus of $10 for every hour saved in production.
For week 25 he worked 44 hours and produced 250 units.
How much was his bonus payment for week 25?
Answer: D.
First find the time the output should have taken. 200 units are expected in 40 hours, so the standard is 5 units an hour, and 250 units should take 250 divided by 5, which is 50 hours. He took 44 hours, so he saved 6 hours, and at $10 for each hour saved the bonus is D, $60. B of $40 uses the 4 hours he worked beyond the 40 hour week, but the bonus rewards time saved against the standard for the output produced, not overtime. The 40 hour week is in the question only to give you the standard rate of 5 units an hour, so compare the hours taken with the hours allowed for 250 units.
Question 3
A business has the following wages policy for its direct workers.
standard working hours per week 40
basic rate per hour $16
overtime basic rate + 25%
standard production per worker per week 100 units
bonus $4 per unit in excess of standard production
Last week Ben produced 115 units and earned $860.
How many hours did Ben work last week?
Answer: A.
Strip the bonus out before going anywhere near the hours. Ben beat the 100 unit standard by 15 units, so his bonus is 15 times $4, which is $60, leaving $800 of the $860 as pay for time worked. The first 40 hours pay 40 times $16, which is $640, so $160 was earned at the overtime rate of $16 plus 25%, that is $20 an hour, giving 8 overtime hours and 48 hours in all, answer A. B of 50 removes the bonus correctly but pays the overtime at a plain $16 with no premium. C of 51 uses the right $20 overtime rate but never takes the $60 bonus out, and D of 53.75 simply divides $860 by $16, ignoring the bonus and the premium together.
Question 4
A manufacturing company employs 20 workers who are paid a basic rate of $30 per hour for a 40-hour week. To meet a special order, the workers each worked 50 hours and were paid a premium of 40% over basic rate for the overtime.
What was the value of wages paid to meet the special order?
Answer: B.
The basic week is 40 hours at $30, so $1200 for each worker. The extra 10 hours are overtime at basic plus 40%, which is $42 an hour, giving $420, so each worker earns $1620 and 20 workers cost $32 400. That is B. A of $30 000 pays all 50 hours at the plain $30 rate and ignores the premium completely. D of $42 000 goes the other way and pays all 50 hours at the $42 overtime rate, when only the 10 hours beyond the basic week attract it, and C of $33 600 applies the overtime rate to the wrong block of hours.
Question 5
Workers are paid a basic rate of $10 per hour.
Overtime rate is paid at time and a half.
Bonus is paid at a rate of 10% of basic pay if production exceeds its target.
The following information is available for a month.
total hours worked 1500
hours at basic rate 1000
target production 12 500 units
actual production 15 000 units
What was the total factory labour cost for the month?
Answer: B.
Three elements here, and each is worked out on its own base. Of the 1500 hours worked, 1000 are at the basic $10, so $10 000, and the other 500 are overtime at time and a half, which is $15 an hour, so $7500. Actual production of 15 000 units beat the 12 500 target, so the bonus is due, and it is 10% of BASIC pay, which is 10% of $10 000, or $1000, making $18 500 in total, answer B. C of $19 250 charges the 10% on the whole $17 500 of basic plus overtime instead of on basic pay alone. D of $24 750 pays all 1500 hours at the overtime $15 and A of $16 500 pays them all at the basic $10, each then adding a 10% bonus on that wrong total.
What this practice covers
These questions are drawn from past CIE 9706 Accounting papers and filtered to labour costs. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
What examiners see students get wrong here
These are the errors that cost marks on labour costs, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Treating the whole of overtime pay as indirect. Only the premium is.
- Treating supervisors' wages as direct labour.
- Forgetting the guaranteed minimum in a piece-rate calculation.
- Using time allowed instead of time taken to calculate basic pay in a bonus scheme.
- Mixing up the Halsey and Rowan formulas, or applying Rowan's fraction the wrong way up.
- Absorbing abnormal idle time into the cost per unit.
- Listing causes of labour turnover without separating avoidable from unavoidable.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Labour costs revision notes.