The interaction between a standard time incentive payment scheme and a simple accounting information system |
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Authors: | Philip W Yetton |
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Institution: | Manchester Business School, Manchester University, USA |
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Abstract: | Under a standard time incentive payment scheme, workers “manage” their recorded job times. A job cost accounting system allocates labour costs and sometimes overheads on the basis of the recorded job times. By simulating the interaction of two such systems at a medium sized engineering firm, it is found that the direct labour costs for a product could be over-estimated by up to 35%. Further, these over-estimates occur on those products on which the workers earn their highest bonuses and, hence, whose discontinuation could damage industrial relations. |
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