Methods of Remuneration and the Effect on Costs

Methods of Remuneration and the Effect on Costs

When considering which method of remuneration should be adopted, a number of major questions have to be borne in mind. Low wages do not necessarily result in low costs of production.. and innumerable instances may be given of manufacturers who pay high wages and whose costs are actually lower than those paying less wages to their employees.

The reasons for this are not difficult to see because apart from the fact that efficient workers earning good wages may produce better work and in greater volume, with less waste, there is the factor of the incidence of overhead expenses, and particularly of the fixed overhead. The saving in cost per unit due to the spreading of overhead over a greater number of units of production may, and often does, exceed the higher amount charged in the cost for well-paid labour.

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