merrick differential peice rate plan..(piece wage plan)

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Class: FY BAF

SUBJECT : Cost accounting› Chapter : labour costing

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Group members:

Kulmit singh banged - (4) Kiranjeet kaur gahunia - (15) Satnam singh saini - (46)

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Merrick’s Differential piece rate

plan

Topic:

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Differential piece rate plans are as follows….

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Content :

Meaning Rates applied Advantages Disadvantages Conclusion

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Content :

Meaning Rates applied Advantages Disadvantages conclusion

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Here is an example with a video…..What actually piece rate is ….?

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Merrick Differential piece rate system

This system made by Mr. Merrick, is a modification of Taylor’s differential piece rate system. Under Taylor’s differential piece rate system, workers by whom 100% efficiency cannot be attained are penalized, whereas under Merrick system, there is no imposition of such punitive lower rate upon them; whereas, those by whom certain percentage or more, of efficiency can be achieved, are rewarded by higher differential rates. 

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It is an output based system

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Content : Meaning Rates applied Advantages Disadvantages conclusion

rate

s Ap

plie

d

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Up to 83% efficiency               Normal rate is applicable 

Between 83% & 100% of efficiency         of normal rate is allowed 

Above 100% efficiency        of normal rate is allowed 

Rates applied are as follows :

110%

120%

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A produced….B produced….C produced…..D produced…..

The piece rate and Standard output are

Level of performance canBe calculated by

So level of performanceof A, B, C, D are…..

For example….

Rates applied are as follows

A’s level is Which is less than 1oo%But more than 83%

So here rate applied will be…

That is….

And so A’s earning is….

Now B’s level is…

Which is more than 100%So rate applied will be…

Which is…

And thus B’s earning is…C’s level is only…Which is even less than 83%Therefore normal piece rateWill be applied here…

D’s level is more than 100%

So same rate of B will be applied here…

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So C will earn …

And thus D will earn…

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Content :

Meaning Rates applied Advantages Disadvantages conclusion

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Advantages of merrick’s piece rate system:

1.  There is a direct connection between effort and reward.

  Efficient workers are paid according to their performance 

and hence a sense of competition is created among workers.

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2.  There is a direct incentive to work .

3.  decreased cost of production specially

overhead cost per unit.

Advantages of merrick’s piece rate system:

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4. Since the cost per unit is fixed computation of labour costs of

production in advance is possible.

5. Worker assumes the responsibility of

his time and output so there is considerable scope of

  reduction in managerial cost.

6. Since the payment is linked with results the idle time costs 

are reduced to minimum.

Advantages of merrick’s piece rate system:

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Other reason why differential piece rate is better than time rate….

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Content : Meaning Rates applied Advantages Disadvantages conclusion

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1. Setting of piece rates or standard hours involves lot of difficulties  It is difficult to establish fair standard- If high standard or rates are established, it Is very difficult to reduce them

subsequently.

2. Quality of work is another casualty of this system. Since the payment  is made on the basis of output, every worker

 tempts to produce more and more irrespective of quality ofproduct.

3.  For the maintenance of quality of standards a rigid system of supervision and inspection is necessary.

There are certain disadvantages of piece rate system:

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4.  The workers tend to work for longer hours in temptation to earn more  This leads to excessive fatigue, ill-health and risk of accident.

5. There is always danger to the flow of production and regularity of 

minimum wage to the workers.

6. uniform rate is paid regardless of quality and quantity of work.There is no special incentive for exceptionally  good workmanship and expertise.

There are certain disadvantages of piece rate system:

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Content :

Meaning Rates applied Advantages Disadvantages Conclusion

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Other differential piece rateplans are…….

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Minimum wage level inIndia and China

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