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Sam is an assembly worker earning $12 per hour for a basic 35-hour week. Any
overtime is paid at a premium of 50%.
In the last 4-week period Sam was paid for 150 hours, during this time 15 hours were
classed as idle due to a machine breaking down. Also included in the number of hours
are 4 hours’ overtime spent working for an urgent job at the request of the customer.
How much should be charged to the production overhead account for the 4-week
period?
A $216
B $240
C $288
D $360- Topics: 0
- Replies: 63
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This question is a bit tricky,firstly overtime payment is 150% x $12=$18
Normally Sam should work 35 hour a week,so for 4 weeks,he should have worked for 35 hour x 4 = 140 hour, but he did worked 150 hour, that means there are 10 hour of overtime (indirect cost). 15 hours idle time are indirect cost as well but 4 hours overtime spent working for an urgent job is direct cost (this one you should know).
Ok knowing these,the amount to be charged to production overhead account(indirect costs) will be 10 hour x $18 + 15 hour x $12 = $360 and answer is D.
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