Current scheme: $7/hour, 40 hour week.
Overtime premium = time and a half.
Usually 400 units are produced in 50 hours
Proposed scheme: rates as above, but in addition the overtime premium is paid on
any hours saved. Assume that 50 units are now made in 44 hours
Hours saved = 50 – 44 = 6
Weekly wages = 44 x $7 +4 x $3.5 + 6 x $3.5 = 343
Cost per unit = 343/400 = 0.8575
Why are we multiplying both the regular overtime and the premium overtime by $3.50?
Should we not be working the regular overtime at the $3.50 and the Overtime premium by the $7.00 ?
Sorry, it should say ‘Overtime rate = time and a half’ not ‘overtime premium’.
The notes are being updated.
Thanks for pointing it out.
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