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This question is taken from June 2009 examination.
The company is deciding on whether to open the store for one more day in a week, on Sunday.
I am quite unsure of this specific part of the question:
It has agreed to pay time and a half to sales assistants that work on Sundays, 50 weeks a year. The normal hourly rate is $20 per hour. In total 5 sales assistants will be needed for the six hours that the store will be open on a Sunday. They will also be able to take a half day off (four hours) during the week. Staffing levels will he allowed to reduce slightly during the week to avoid extra costs being incurred.
My answer was:
Extra salary costs
($20*5*6*50*1.5) = $45,000
Savings from half day off
(20*5*4*50) = ($20,000)Incremental salary costs $25,000
The correct answer was $45,000. Savings from half day off were not included.
Am I correct to assume that staff will still be paid while they are on off, for not only this question, but for the other similar relevant costing questions as well?
It is correct to assume it for this question, but not necessarily for all questions – it depends on the wording.
The clue is the sentence that says “Staffing levels will be allowed to reduce slightly during the week to avoid extra costs being incurred”.
If they didn’t allow staffing levels to reduce slightly, it would mean that they would need to pay other people to do the extra 4 hours work. If they were not having to pay the people taking the time off, then paying other people instead would not end up costing them any more. Since it says they will reduce staffing to avoid extra costs, it means that the people taking the time off will still be getting paid.
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