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direct workers were paid $40,000 for normal working. in addition they were paid a total of $12,000 for overtime working. overtime hours were required due to a general shortage of labour was paid at a time and a half.
does this mean that the overtime is not a direct labour cost? if not, what would be the total direct labour cost?
my solution was 12,000 x 1/2 = 6,000
$40,000 + 6,000= 46,000 direct labour costis it correct?
Since 12,000 was the total paid for overtime, 8,000 was at the normal rate and 4,000 was the premium (they are paid at time and a half, so 50% (1/2) as much again as the normal rate).
The normal rate is a direct cost, but the overtime premium and an indirect cost unless it was for a specific job at the customers request (which was not the case here).
Therefore the direct cost is 40,000 + 8,000 = 48,000.
I dont understand how you got the 8,000 as a normal rate and 4,000 was the premium sir..
If overtime is paid at time and a half, then it means that they are paid normal rate plus a premium of half normal rate.
If the normal rate is 8,000 then the premium is 1/2 x 8,000 = 4,000. The two together come to 12,000 which is the total that they were paid for the overtime working.
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