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labour costs and remuneration methods

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA BT – FIA FBT › labour costs and remuneration methods

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by Ken Garrett.
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  • Author
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  • August 7, 2014 at 5:30 am #186795
    rajive
    Participant
    • Topics: 3
    • Replies: 3
    • ☆

    Employees are paid $7/hour for a standard 40 hour week. Overtime is paid at time and one half.
    The employee is expected to make at least 120 units in a week, and to encourage productivity, each unit in excess of 120 will generate an additional payment of $5 less any overtime premium that would relate to the time the additional unit would normally take.
    What is an employee’s wages in a week in which 135 units are made and the employee works 44 hours?

    Example 1
    Note: each unit is expected to take 40 x 60/120 = 20 minutes

    $ Basic wages for 44 hours = 44 x $7 = 308.00
    Overtime premium 4 x $7 x ½ = 14.00
    Extra units 15 x $5 75.00 Overtime premium that could be associated with the extra units
    15 x 1/3 x $7 x 1/2 -17.50 379.50

    What was the calculation made that cause 1/3 to be included? Can’t understand where it came from.

    August 7, 2014 at 10:25 am #186900
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10583
    • ☆☆☆☆☆

    Each unit should take 20 minutes to make ie 1/3 of an hour.

    Therefore, if extra 15 units are made this implies 15/3 = 5 hours overtime, and the overtime premium rate is 1/2 x $7

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