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Analysis of the gross wages in a factory reveals the following:
Direct operatives
Normal hours worked at basic rate
36,260
Overtime hours at basic rate
4,112
Overtime premium
1,028Indirect operatives
Normal hours worked at basic rate
14,320
Overtime hours at basic rate
1,760
Overtime premium
440What amount would be recorded as a direct cost?
Sir this question is not much tricky. I just want to ask that I have read that if there is overtime often so the labor hour turn into inflated labor hour rate (which contain overtime also) so will we add overtime premium to direct labor cost?
I have never come across that treatment. In a question you should stick with the conventional treatment that overtime premiums are an indirect cost. The only exception is if overtime was being done for a specific job. Then all wage costs, including overhead premiums, are direct.
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