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MA1 Kaplan Multiple choice questions

JMJeong Min5y ago
Hi All, Much appreciate your help here... Question A manufacturer employs two grades of labour in its machining department, grade A and grade B. Grade A employees are treated as direct labour employees and grade B employees are treated as indirect labour employees. Grade A employees are paid $8 per hour and grade B workers receive $6 per hour. The basic working week is 40 hours. Overtime is paid at time +50%, to all employees in the department. There are 10 grade A employees and 6 grade B employees. During a particular week, each grade A employee worked for 45 hours and each grade B employee worked for 43 hours. The overtime was necessary due to staff sickness. What will be the charge to production overhead for the week? A $54 B $254 C $1,602 D $1,802 Here is the calculation from the answer sheet. Indirect costs Grade B labour. $ Basic wages (6 x 43 hours x $6) 1,548 Overtime premium (6 x 3 hours x $3) 54 Grade A labour Overtime premium (10 x 5 hours x 50% x $8) 200 I don’t understand the reason behind the overtime rate was charged at 50% of the normal pay as It’s written that the overtime is paid at time + 50%. Isn’t time +50 % same as time and a half which is 50% additional of the normal pay? Or Is the rate (0.5) due to the staff sickness?
John MoffatJohn MoffatTutor5y ago#1
The question asks for the production overhead (i.e. the indirect cost). Therefore the normal wage of the grade A employees is not relevant - they are direct labour and it is therefore a direct cost. However their overtime premium is an indirect cost (it would only be a direct cost if it was at the specific request of the customer. Do watch my free lectures on labour where all this is explained. 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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