Wage rate Rs. 30 per hour; standard time 6 hours, and actual time taken 4 hours. Ascertain total amount of wages earned under Rowan Plan :

Question

Accepted Answer

The correct option is 2:
The total amount of wages earned under the Rowan Premium Plan is calculated by adding the basic time wages to the bonus. The formula for the Rowan Plan is: Total Wages = (Time Taken × Hourly Rate) + Bonus, where the Bonus is calculated as (Time Saved / Standard Time) × (Time Taken × Hourly Rate). First, we calculate the Time Saved (TS): Standard Time (6 hours) - Actual Time Taken (4 hours) = 2 hours. Next, the Basic Time Wages are calculated: 4 hours × Rs. 30/hour = Rs. 120. Finally, the Bonus is calculated: (2 hours / 6 hours) × Rs. 120 = Rs. 40. Therefore, the Total Wages are Basic Wages (Rs. 120) + Bonus (Rs. 40), resulting in a total earning of Rs. 160. This plan provides an incentive proportionate to the time saved relative to the standard time, ensuring a benefit for both the employee and the employer.

The incorrect option is 1:
The amount of Rs. 180 would represent the gross wages if the worker had taken the entire Standard Time of 6 hours (6 hours × Rs. 30/hour = Rs. 180). Alternatively, this could represent an incorrect calculation based on a different plan, such as the Halsey Plan if the bonus percentage or rate were incorrectly applied. Under the Rowan Plan, a worker who completes the task in less time earns more than their basic time wages but less than a worker under the Halsey Plan in the same scenario, provided the time saved is less than 50% of the standard time. In this case, Rs. 180 does not reflect the time-saved bonus.

The incorrect option is 3:
Rs. 120 is the figure for the Basic Wages only, calculated as Actual Time Taken (4 hours) multiplied by the Hourly Rate (Rs. 30). This would be the total earnings if the company used a simple Time Rate System, which pays only for the hours worked and provides no incentive or bonus for efficiency (time saved). This completely ignores the fundamental component of the Rowan Plan, which is the efficiency bonus designed to motivate the worker to finish the job faster than the standard time.

The incorrect option is 4:
The figure of Rs. 40 represents the Bonus component *only* under the Rowan Plan, which we calculated as (Time Saved / Standard Time) multiplied by the Basic Wages, i.e., (2/6) × Rs. 120. Total earnings must include both the Basic Wages for the time worked and this bonus. Paying only the bonus would result in an absurdly low total wage for the worker, which would undermine any incentive system. Therefore, Rs. 40 is just one part of the total compensation.