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Direct and Indirect labour cost

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Direct and Indirect labour cost

  • This topic has 3 replies, 2 voices, and was last updated 6 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 1, 2024 at 1:03 pm #712948
    Aynur02
    Participant
    • Topics: 17
    • Replies: 18
    • ☆

    Hello Sir, I am very confused, could you clarify this for me?

    In this question:

    A direct labor employee works a standard 37-hour week and is paid a basic rate of $15 per hour. Overtime is paid at time and a half. In a week when 40 hours were worked and a bonus of $20 was paid, what was the direct labor cost?

    Answer: 40 × $15 = $600.

    My question is:

    If the question asked us for indirect labor cost, how would we calculate it? Would it be (40 – 37) × $15 x 1.5, or is there another approach? Please correct me if I am wrong. I know it seems simple, but I am confused especially in this part “Overtime is paid at time and a half.”

    November 2, 2024 at 9:02 am #712961
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54668
    • ☆☆☆☆☆

    The extra cost of the overtime is an indirect cost.

    There are 3 hours of overtime and ‘time and a half’ means that the premium over the basic rate is 0.5 x the basic rate and so is 0.5 x $15 = $7.50 per hour. So the total overtime premium (which is an indirect cost) is 3 x $7.50.

    Have you watched my free lectures on accounting for labour? 🙂

    November 2, 2024 at 2:55 pm #712972
    Aynur02
    Participant
    • Topics: 17
    • Replies: 18
    • ☆

    thankk youu very much for your help. I will definitely go watch all lectures

    November 3, 2024 at 2:49 pm #712994
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54668
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Direct and Indirect labour cost’ is closed to new replies.

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