# Rowan Premium Plan | Labour Cost – Free Cost Accounting Articles

### What is Rowan premium plan?

This premium bonus plan was introduced by Mr. James Rowan. It is similar to that of Halsey plan in respective of time saved, but bonus hours are ascertained as the proportion of time taken which the time saved bears to the time allowed and they are paid for at the rate.

Rowan premium plan is also similar to the Halsey plan, except in the calculation of the bonus.
The main features of his plan are:
(a) Workers receive remuneration based on actual time taken by them in completing the job.
(b) Workers receive a bonus for the time saved i.e., for the difference between the standard time and actual time.
(c) Bonus is calculated as a proportion of the time wages as time saved bears to the standard time. The Rowan premium plan also guarantees wages on a time basis.

1) Bonus = (Time Saved/Time allowed) X Time taken X Time rate

2) Earnings = (Time taken X Time rate) + Bonus

#### Example

The standard time for producing 250 articles is 65 hours. The rate of wages is Rs. 2.50 per hour. The actual time taken for producing 250 articles is 55 hours. What are the earnings of the worker under the Rowan plan?

#### Solution

1. Bonus = (Time Saved/Time allowed) X Time taken X Time rate = (65-55/65) X 55 X Rs. 2.50 = Rs. 21.15
2. Earnings = (Time taken X Time rate) + Bonus = (55 X Rs. 2.50) + 21.15385 = Rs. 158.65
3. Effective Wage Rate per hour = Rs. 158.65/55 = Rs. 2.89

#### Evaluation:

The merits and demerits of the Rowan plan are similar to those of the Halsey Plan. An additional advantage under the Rowan plan is that the worker is not induced to rush through the work because if the time saved is more than 50% of the standard time, the bonus will come down. However, the calculation of bonuses is complicated. You may want to do the sum, which comprises all the above models. Try to understand the example as follows first and then try to do sums found at the end of the chapters on your own.