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A business employs two grades of labour in its production department. Grade A workers are considered direct labour employees and are paid $10 per hour. Grade B workers are considered indirect labour employees, and are paid $6 per hour.
In the week just ended, Grade A labour worked 30 hours of overtime, 10 hours on a specific customer order at the customer’s request, and the other 20 hours as general overtime. Grade B labour worked 45 hours of overtime, as general overtime. Overtime is paid at time-and-one-half.
What would be the total amount of pay for overtime worked in the week that is considered to be a direct labour cost?
A. $50
B. $150
C. $285
D. $350working: basic pay = 10 X 10 =100 plus overtime which is considered a direct cost because of a specific customer order. 10 X 10X 50% = 50
My final answer is 150. but the answer is D – 350. Can you explain why is that so?
Thanks in advance
It is indeed only Grade A workers that are relevant (because Grade B are indirect employees).
However the question asks for the total amount of pay for overtime that is a direct cost. So that is not only the $50 for the overtime premium (because it was at the customers request) but also the basic pay of $10 per hour for all of their overtime hours. So in addition to the $50 premium there are 30 hours at $10 which is another $300.
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