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 cost
is it correct?
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direct labour
10y ago#1Since 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..
10y ago#3If 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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