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A direct labour works standard hours of 35 per week.In week 8 he work over time of 10 hours extra. the basic pay is 10 per hr and over time is paid at 50% of basic pay. which of the following is the direct labour cost?
1.400$
2.350$
3.450$
4.375$Ok here’s what I think it is:
Direct Labour Cost = standards hours pay + BASIC pay of overtime
= (35×10) + (10×10) = 450 dollars ?
Can somebody please confirm this or correct me please.- Topics: 0
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well, isn’t the overtime 50% of the basic pay? So, it would be 50% of 10/h = 5/h.
@tryingtopassaccaexams said:
well, isn’t the overtime 50% of the basic pay? So, it would be 50% of 10/h = 5/h.You make a good point, but I was under the impression that direct labour costs are those that relate directly to production. Any bonus/premium payments are not included.
The worker works 35 hours normal time a week, and this week he works another 10 hours overtime.
His “normal time” pay = 35 hours x $10 = 350
He works 10 hours extra, and the “normal” element of his pay for those 10 hours is = $10 x 10 hours = 100.
The bonus/premium element of overtime pay or the incentive to work an extra 10 hours = $10 x 50% x 10 hours = 50.Therefore his total pay for week 8 = $500 (adding up all of the above).
However direct labour cost would only include the “normal” elements of pay and not the “premium” pay added for working more hours than required.
So: 350 + 100 = $450
Am I right in my reasoning or have I made a mistake? (I’m still studying like the rest of us!)
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…me too! that’s the fun part of the ACCA exams: the questions may seem to be easy, but in fact they are quite tricky (at least some)
you are right. I was mislead by the fact that the problem does not explicitely say “time and a half” for the overtime payment, but just 50% of the basic pay. It may be cofusing some time…at least, for me 🙁
both of them are same things. for example a labour work overtime he should be paid the basic hour rate but we say if you work overtime we pay you half of your basic pay per hour in ADDITION remember this other wise he will not work overtime. So time and half mean 10 + 5 and 5 is the 50% of basic rate.Overtime has an additional element of 5$ which is consider to be indirect for the company.Labour will get 15$ but company say i have given 5$ extra so this cost will be indirect cost and 10 will be direct.
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