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The following information relates to Job 3579, which is being carried out by Mittenson Hands Ltd to meet a customer’s order.
Material issued $5000
Material transferred to the job 2456 $400Grade X labour (direct labour): 200 hours at $3 per hour basic rate. 100 of these hours were worked in overtime, at the request of the customer, in order to complete the job as early as possible.
A supervisor, Wat Chover, recorded on his job sheet that 20 hours of his time was spent on this job. He is paid $5 per hour, and the cost of his time is treated as a direct labour cost in the company’s cost accounts.
What is the full production cost of Job 3579?A $6,300
B $6,400
C $6,500
D $6,900This question’s answer is C $6500
By adding 5000 + 300 (100×3) + 1000 (5×200) + 100 (20×5) + 100 (100×1)
I’m confused that we are adding Overtime premium and not overtime basic pay here. Why?I am confused as well and either you have not copied out the question correctly or there are mistakes in your book.
The question as you have typed it does not say what the overtime premium is per hour.
Assuming that overtime is paid $4 per hour (and therefore a premium of $1 per hour), then the cost of the Grade X labour is 200 hours (the total time worked) x $3 per hour, plus the overtime premium of 100 hours x $1 per hour. I have no idea where the 1,000 (5 x 200) is coming from!!
If this is a question from the BPP Revision Kit then tell me which question so that I can check the wording.
Sorry, actually I missed some data there. Overtime premium is $1. Basic rate is $3. Production overheads are $5 per labour hour so we have $1000 (5×200).
What I am confused about is, if we have direct labour cost of 100hrs x $3 = $300 right? So for overtime we will again add overtime 100hrs x basic rate $3 and 100hrs x premium $1?
So totals should be:
Direct labour 300
Over basic pay 300
Overtime premium 100
Prod overheads 1000
Materials used 5000
Supervisor 100
Am I right?
And will we take 5000 material or 5000-400=4600 material?It is correct, except that the direct labour cost is the cost of all labour at basic rate and so is 200 hours x $4 = $600.
The overtime premium is 100 hours x $1 = $100
However, the total is the same 🙂
Thank you so much.
But can you still specify the value of materials is 5000 or 4600?
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