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40 direct workers work for 4 weeks.direct employees were paid at a basic rate of $4 per hour for a 38 hour a week. Total hours worked in 4 week period is 6528. Overtime premium is paid at 35% of basic pay. 188 hours of direct workers time were registered as idle. calculate direct labour cost and indirect labour cost.
Ans) basic working hours 6080
Excess hour 448
Overtime premium $1.4
Direct labour cost – 6080*4= 24320 (in book – 25360)
Indirect labour cost – 188*4 + 260*4 + 448*1.4= 752+1040+627.2=2419.2
( In book 1379.2)
I don’t know why am I wrong , however my ans will match if I include 1040 in direct labour cost rather than indirect cost but why?
All labour at basic rate (excluding idle time) is a direct cost. It is only the overtime premium (and the idle time) that is an indirect cost.
They worked 6528 hours. 188 of these hours were idle time, which leave 6340 worked hours. 6340 x $4 = $25,360, and this is the direct cost.
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