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MA1 Kaplan Multiple choice questions

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › MA1 Kaplan Multiple choice questions

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • Author
    Posts
  • July 26, 2021 at 2:16 pm #629492
    lswuk3432
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    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?

    July 26, 2021 at 6:50 pm #629510
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51552
    • ☆☆☆☆☆

    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.

  • Author
    Posts
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