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Hello I know that overtime that has been specifcally requested by a client is regarded as a direct cost but in calculating the gross pay of an employee showing direct cost yes specifically requested over time will be included but I don’t understand y the overtime hours are included in the basic pay at the same time calculated separately as overtime premium to come up with total direct wages
For example: suppose the basic pay is $10 per hour, and for overtime they pay $13 per hour.
The direct cost is always the total hours worked at $10 per hour.
The extra $3 per hour is the overtime premium and the overtime hours at the extra $3 per hour are a direct cost if worked at the request of the client, and indirect otherwise.Have you watched the free lectures, because I show this in an example.
The question was
Employee A is a carpenter and normally works 36 hours per week .The standard rate of pay is 3.6 dollars per hour.A premium of 50% of the basic hourly rate is paid for all over time hours worked.During the last week of October , Employee A worked for 42 hours .The overtime hours works for the following reasons :
machine breakdown 4 hours
to complete a special job at the request of a customer 2 hoursHow much of Employee As earnings for last week of October would have been treated as direct wages ??
solution
Basic pay (38hours x 3.6) = 136.80
Overtime premium (2 hours x 1.8) = 3.6
total = 140.40
my question is why did the add the 2 hours for overtime to the 36 hours for normal hours and then calculate overtime premium seperatly again …yes I know that since it was specifically requested but y then add the overtime ours to normal hours but still calculate overtime premium seperatlyI do try to watch the lecture videos but it seems network is bad here I hardly access the videos
The employee worked for 42 hours of which 36 hours were normal and 6 hours were overtime (4 hours because of machine breakdown and 2 hours at the request of the customer).
All the pay for the 4 hours of machine breakdown is an indirect costs.
All the pay for the other 38 hours is a direct cost (because the 2 hours overtime were at the request of the customer).
Of those 38 hours, 36 hours will be paid at the normal rate of $3.60 per hour.
The other 2 hours will be paid at the overtime rate which is $3.60 plus (50% x $3.60) = $5.40 per hour.So the total direct cost = (36 x $3.60) + (2 x $5.40) = $140.40
Hopefully this makes it clearer for you. (Obviously how you do the workings in the exam is irrelevant – it is the final answer that matters.)
how u have worked it out is exactly how I understand it but in this case they multiplied 38 hours which is inclusive of the 2 over time hours by 3.6 its suppose to be 36 multiplied by 3.6 cud it be that it was an error or some times its done that way??
But as I wrote – how you do the arithmetic is completely irrelevant.
Do it whichever way you find clearer.In the exam, all that will be marked is the final answer – nobody will look at your workings for Section A of the exam (and this would only ever be asked in Section A).
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