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Current scheme: 7/ hour at a 40 hour week.
Overtime premium = time and a half.
Usually 400 units are produced in 50 hours.Work weekly wages and cost per unit.
Basic Paid = $7 x 40 hrs = $280
OT Paid = $7 x 1.5 x 10hrs = $105
Gross Paid = $385$385 / 400units = $0.9625
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Basic Paid = $7 x 40hrs = $280
Units produces in 40 hours = 400units / 50hrs x 40hrs = 320units
$280 / 320units = $0.875Is this correct cause both answer also different ?
Weekly pay = 385 (that’s what’s paid)
The overtime premium shoudl not be charged to production as a labour cost – it’s regarded as an indirect cost (overhead) unless a customer specifically requested overtime to be worked to get a job done quickly).
Total pay at notmal rate for 50 hours = 50 x 7 = 350
Cost/unit = 350/400 = 0.875Well thats not the explaination in the notes: see below:
Illustration
Current scheme: $7/hour, 40 hour week.
Overtime premium = time and a half.
Usually 400 units are produced in 50 hours
Weekly wages = 50 x $7 + 10 x $3.5 = $385
Cost per unit = $385/400 = 0.9625
Proposed scheme: rates as above, but in addition the overtime premium is paid on
any hours saved. Assume that 50 units are now made in 44 hours
Possible results:
Hours saved = 50 – 44 = 6
Weekly wages = 44 x $7 +4 x $3.5 + 6 x $3.5 = 343
Cost per unit = 343/400 = 0.8575
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