Production Overheads account — OpenTuition Forums

Aashvin98212y ago

Sir, please help.Thanks 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 break 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 Prod.OHD account for the 4-week period? A.$216 B.$240 C.$288 D.$360

John MoffatTutor12y ago#1

Basic pay, and overtime for a specific job at the customers request are direct labour costs. However, general overtime and idle time are indirect costs i.e. overheads. So in the question above, Sam worked 150 hours. His basic hours were 4 x 35 = 140 hours. So in total, 10 hours of overtime of which 4 were for the urgent job and therefore 6 were general overtime. Also, 15 hours were idle. So.......as overheads are the idle hours - 15 x $12 = $180 Also, the extra overtime premium paid for 6 of the overtime hours - 6 x 50% x $12 = $36 So the total indirect labour (or overhead) = 180 + 36 = $216. (Alternatively, the total he was paid was 150 hours at $12, plus overtime premium $186010 hours at $6. So a total of $1860. The wages treated as direct labour are the hours he actually worked, at basic pay: 150 - 15 = 135 x $12 = $1620, plus the overtime for the special work: 4 x 50% x $12 = $24 So total direct labour = 1620 + 24 = $1644. So the indirect labour is the rest. i.e. 1860 - 1644 = $216 )

Aashvin98212y ago#2

Thanks Sir, i got it now..Have a nice day

John MoffatTutor12y ago#3

You are welcome :-)

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