Rag Swag Inc. manufactures various styles of men’s casual wear. Shirts are cut and assembled by a workforce that is paid by piece rate. This means that they are paid according to the amount of work completed during a period of time. To illustrate, if the piece rate is $0.10 per sleeve assembled, and the worker assembles 800 sleeves during the day, then the worker would be paid $80 (800 × $0.10) for the day’s work. The company is considering adopting a lean manufacturing philosophy by organizing work cells around various types of products and employing pull manufacturing. However, no change is expected in the compensation policy. On this point, the manufacturing manager stated the following: “Piecework compensation provides an incentive to work fast. Without it, the workers will just goof off and expect a full day’s pay. We can’t pay straight hourly wages—at least not in this industry.” A garment company was following piece rate system for its employees and suddenly lean manufacturing system was introduced. The company wishes to continue with the same piece rate system. Identify the statement that suits the given situation. a. A piece rate system is an effective system to improve productivity and it also supports the philosophy of lean manufacturing. b. A piece rate system is a traditional method that is not suitable for the lean manufacturing system. Because the piece rate system increases the inventory rather than efficiency. c. A piece rate system makes the employees specialized in the job. d. A piece rate system is more effective to support the market demand.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Rag Swag Inc. manufactures various styles of men’s casual wear. Shirts are cut and assembled by a workforce that is paid by piece rate. This means that they are paid according to the amount of work completed during a period of time. To illustrate, if the piece rate is $0.10 per sleeve assembled, and the worker assembles 800 sleeves during the day, then the worker would be paid $80 (800 × $0.10) for the day’s work.

The company is considering adopting a lean manufacturing philosophy by organizing work cells around various types of products and employing pull manufacturing. However, no change is expected in the compensation policy. On this point, the manufacturing manager stated the following:

“Piecework compensation provides an incentive to work fast. Without it, the workers will just goof off and expect a full day’s pay. We can’t pay straight hourly wages—at least not in this industry.”

A garment company was following piece rate system for its employees and suddenly lean manufacturing system was introduced. The company wishes to continue with the same piece rate system. Identify the statement that suits the given situation.

a. A piece rate system is an effective system to improve productivity and it also supports the philosophy of lean manufacturing.

b. A piece rate system is a traditional method that is not suitable for the lean manufacturing system. Because the piece rate system increases the inventory rather than efficiency.

c. A piece rate system makes the employees specialized in the job.

d. A piece rate system is more effective to support the market demand.

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