Accounting for material (Labour direct and indirect cost)

CChioma12y ago

Good Evening Mr John, Thanks for the lectures, you are awesome. Please I have 2 questions for you; 1)When it is said ” overtime is paid at time and a quarter” what does it mean? 2)Skilled workers are considered to be direct workers and are paid $10 per hr. They worked 20hrs overtime this week, 12hr on specific orders and 8 on general overtime. Overtime is paid at a rate of time and a quarter. I am am required to calculate total overtime pay considered to be direct cost? This is what was given as the solution Specific time (direct cost) =12hrs ×$10×1.25 General overtime (direct cost) = 8hrs×$10×1 ” (indirect cost) = 8hrs×$10×0.25 I do not understand how 1.25 was gotten and why it was split in general overtime as 1 for direct cost and.0.25 as indirect cost. Pls help, Thanks.

John MoffatTutor12y ago#1

1) If overtime is paid at 'time and a quarter', it means that for every hour overtime they work you will pay them for 1.25 hours. So....if you pay workers $5 per hour and they work 20 hours of overtime, then the amount you will pay them for the overtime will be 20 x 1.25 x $5 = $125 2) Looking back at my example in (1), for the overtime work they are paying an extra $25 above what they would normally pay (normally they would be paying 20 hours at $5 = $100). If overtime is for a specific job, then all the cost of it is treated as a direct cost. If it is just general overtime (not for any specific job) then only the normal rate ($100) is treated at a direct cost, and the extra ($25 in my example) is treated as an indirect cost.

CChioma12y ago#2

Thank you so much Mr. John. You are really awesome.... making very easy things that would otherwise be very difficult. Keep up the good work.

John MoffatTutor12y ago#3

Thank you :-)