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A company employs 100 direct workers in the factory, who are paid a
basic rate of $5 per hour for a 35-hour week. In addition to working their
normal hours last month, each worker was asked to work an additional
5 hours overtime per week to meet general production requirements.
All overtime hours are paid at time and a half. As a result of some faulty
material, 150 hours of direct labour time were registered as idle.
What is the indirect labour cost for last month, assuming a 4-week
Dear Sir,I calculate so:
150*5=750-> idle time pay
100*4*35*2.5= overtime premium
but correct answer
Idle time = 150 hours @ $5 = $750
Overtime (premium only) = 100 × 5 × 4 @ $2.50 = $5,000
I can’t agree with this explanation
The correct answer is correct.
They are only paid extra when they work overtime (and they work an extra 5 hours a week overtime). You have taken 35 hours a week but these are there normal working hours, and they are not paid extra for their normal working hours.
All overtime hours are paid at time and a half
But if overtime are paid at time and a half
100*4*(5+2,5) should be or not?
Although they are being paid 7.50 per hour during overtime, it is only the premium of 2.50 that is an indirect cost. The basic pay of 5.00 per hour is a direct cost.
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