Page 129 - CalcBus_Flipbook

CH 14] Calculating Business 14-3

Piecework

Piecework wages is a system that rewards productivity. The more productive the employee is
the more they earn as their pay is totally dependent on their units of production and not the hours
worked. It is similar to commission. This system incentivizes employees to increase their individual
production, in turn the business they work for benefits with increased production that translates
to sales.
However, the nation is encumbered with overtime laws, so this piece work must be equated to
hours of work and the employer establishes the number of hours in the work day with a maximum
of 8 hours per day for 5 days. This makes a 40 hour work week. Overtime is generally calculated at
1½ (1.5) times the employee's average hourly rate for their straight time pay on 40 hours. Some
employment situations also have a higher overtime value and even add a bonus for exceeding a
progressively higher output on production. Piecework Wage:
When piecework wage is used, the employee is paid a single agreed-on amount (piece rate) for Work paid for
according to the
each piece they produce. The employee's pay is calculated by multiplying the number of pieces amount produced.
produced during the period by the piece rate. The overtime rate is applied to production over 40
hours per week; this can occur with 9 or 10 hours in a work day or Saturday production days.

Example A: Michelle Wilkerson produced 108 items on Monday, 107 on Tuesday, 109 on
Wednesday, 110 on Thursday, and 105 on Friday. Her base rate of pay for each item
is $1.85. (a) How many items were produced for the week? (b) On average what is the
production per hour for this 40 hour work week? (c) How much did she earn for this
production during the week? She worked 40 hours, (d) what is her hourly rate for
this piecework?

Solution algorithm A:
(a) 108 + 107 + 109 + 110 + 105 = 539 items produced
(b) 539 items ÷ 40 hours = 13.475 items per hour
(c) 539 (items) x $1.85 (rate) = $997.15 gross pay
(d) $997.15 gross pay ÷ 40 total hours =$24.93 per hour.

Example B: Amy Simpson produced 107 items on Monday, 108 on Tuesday, 110 on Wednesday,
109 on Thursday, 107 on Friday, and 55 on Saturday. She worked a total of 44
hours of which Saturday was a half-day time. Her base rate of pay for each item is 14
$1.85. (a) How many items were produced for the week? (b) On average what is the
production per hour over the 44 hour work week? (c) How much did she earn for this
production during the week (6 days)? (d) What is her average hourly rate for the
week? (e) What is her average piece-rate pay per item?

Solution algorithm B:
(a) 107 + 108 + 110 + 109 + 107 + 55 (over time items) = 596 items produced
(b) 596 ÷ 44 = 13.55 items per hour.
(c) 596 – 55 = 541 (items in 40 hrs) x $1.85 (rate) = $1,000.85 gross pay—Base
$1.85 x 1.5 (over time rate) x 55 (items in 4 hours) = $152.63 gross pay Saturday
(c) $1,153.48 Total earnings
(d) $1,153.48 ÷ 44 = $26.22 Average hourly rate for this weeks’ work,
(e) $1,153.48 gross pay ÷ 596 total items = $1.94 per item.

With your hand held calculator:
Begin with Overtime item pay if worker had worked the prior 5 days.

Cl/C 55 M+ X 1.5 X 1.85 = 152.625 —> means $152.63
(Record this amount on paper
rounded to the nearest .01)

107 + 108 + 110 + 109 + 107 M+ X 1.85 =

1000.85 + 152.63 = 1153.48 —> means $1,153.48

÷ MR = 1.9353 —> means $1.94 (Average piece rate)

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