The effects of changes in remuneration methods and changes in productivity.

Basic Paid = $7 x 40 hrs = $280 OT Paid = $7 x 1.5 x 10hrs = $105 Gross Paid = $385 $385 / 400units = $0.9625 ------------------------------------------------------------------------------------------------------------------- Basic Paid = $7 x 40hrs = $280 Units produces in 40 hours = 400units / 50hrs x 40hrs = 320units $280 / 320units = $0.875 Is 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 = 0.875

Well 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