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Dear Sir,
Hope you are fine.
Grateful if you could sort out this question for me.
Basic hours 7000
Hours of overtime 1000
Hours of idle time 500Basic pay $15/ hour and overtime is paid at a premium of 33 1/3%. Idle time caused by power cut and increased hours of overtime normally worked due to general pressure of work. Calculate
1) direct labour cost
2) indirect labour costPlease correct me if I am wrong.
My workings are as follows:Direct labour cost= ( 7000+1000)×15=$120000
Indirect labour cost
Overtime premium=(1000×15×33 1/3%)=$5000
Idle time=(500×15)=$7500
Total labour cost= $132500Thank you very much.
Why are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers – they have answers and explanations 🙂
Your working are correct except that the wording of the question suggests that they are paid for a total of 8,000 hours (basic hours plus overtime) and that therefore the 500 idle hours are part of the basic hours (although the wording of the question is not really very good).
This would mean that the direct labour cost would be (7000 – 500 + 1000) x $15.
Otherwise everything is correct.
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