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Overtime premium

Overtime premium is the additional rate above normal basic pay for overtime hours. The total overtime wage includes both basic pay and this premium. For costing, a general premium used to meet the overall production schedule is commonly production overhead, while a premium incurred solely for a particular rush job may be directly attributed to it. Apply the reason and conventions given rather than assuming the same treatment in every situation.

Worked example

Eight overtime hours at a normal $10 rate paid at time-and-a-half cost $120: $80 basic pay plus a $40 premium.

Common mistake

The premium is not the full overtime wage, and a premium percentage must be applied to the normal rate, not added twice.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA MA Direct September 2026–June 2027
FIA FMA Direct September 2026–June 2027