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Hi, Can you help me with this question, please?
Last month an organisation’s direct workers were paid $40,000 for normal working. In addition they were paid a total of $12,000 for overtime working. Overtime hours which were required due to a general shortage of labour were paid at time and a half.
What was the total direct labour cost for last month?I would just add the 40k and the 12k.. it’s what was spent, no?
Thank you.
It is what was spent, but that is not what the question asks for.
It asks what is the total direct cost (as opposed to indirect).
Overtime premium is an indirect cost, unless it is on a specific job at the customers request.
Here they were paid 12,000 for overtime. Since overtime is paid at time and a half, it means that of the $12,000, $8,000 was normal pay for the hours and the other $4,000 was overtime premium.
So the direct cost (the normal pay) is 40,000 + 8,000 = $48,000.
Thank you so much for your help and quick response. I wouldn’t think I would get an answer on weekend 😉
Given that they are paid time and a half for overtime working, they are paid 1.5 times the normal rate. Therefore the normal pay is 1/1.5 x $12,000. = $8,000, and the overtime premium is 0.5/1.5 x $12,000 = $4,000.
During the month of September 20×3 the following labour hours were worked. Direct production workers 2,300 basic hours plus 500 hours of overtime. Indirecr workers 640 hours including 120 hours of overtime The direct workers are paid a basic rate of $7.20 per hour and the indirect workers $6.20 per hour.Overtime hours are paid at time and a half. The overtime premium for direct labour is classed as an indirect cost. Of the hours paid to the direct production workers 100 of these were idle tiome hours. Calculate the direct labour cost for the month.
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b) In week 40, the direct production workers of an organization worked for 680 hours including 110 hours of overtime. The indirect workers worked for 180 hours which included 40 hours of overtime. Included in the direct workers’ hours were 50 hours of idle time. The direct production workers have a basic rate of $12.00 per hour and indirect worker have a basic rate of $9.00. All overtime is paid at time plus one third.
(i) What is the direct labour cost for the month?
(ii) What is the indirect labour cost for the month?
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