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Labor cost

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Labor cost

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.
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  • July 23, 2019 at 8:56 am #524693
    garvit
    Member
    • Topics: 41
    • Replies: 32
    • ☆☆

    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?
    Thankyou sir

    July 24, 2019 at 7:06 am #524777
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    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.

    Have you watched me free lectures on this? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.

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