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Hi John,
There’s a question in MA KIT as follows:
A manufacturing firm is very busy and overtime is being worked. How would the amount of overtime premium contained in direct wages normally be classed?
A. Part of prime cost
B. Factory overheads
C. Direct labour costs
D. Administrative overheadsCould you please explain why the answer is B?
Thank you so much in advance.
As I explain in my free lectures on accounting for labour, overtime premiums are treated as indirect costs (unless the overtime is for a specific job at the customers request, which is not the case here).
Indirect costs are overheads.
Do watch my free lectures on this. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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