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