MA1 - Labour Cost

Michael is paid $9 per hour unless he works more than the basic 40 hours per week, when any excess is paid at time and a half. Last week he completed a number of jobs in basic hours, but one customer's job needed six hours of overtime. The reason for the overtime was a power failure during the week, which meant that no work could be completed until power was restored.

Which of the following is the correct treatment of the $81 paid to Michael for his overtime hours?

• $54 is treated as a direct cost, $27 as an indirect cost

• The entire $81 is treated as a direct cost

• The entire $81 is treated as an indirect cost

• $54 is treated as an indirect cost, $27 as a direct cost

Which TWO are indirect labour?

• A technician that fixes electrical systems for clients at an electrical maintenance company.

• A pastry chef that makes muffins and cakes at a bakery.

• 1. C.A machinist that makes spare parts and tools at a shipbuilding company

• A production manager at a factory making toys.

Jai usually works a 40-hour week at $20 per hour. Last week he was paid overtime at time and a half for an extra three hours of work at the request of the customer.

What value of Jai’s wages should be treated as direct costs?

• $800

• $830

• 1. $860

• 1. $890

Vik is paid on a piecework basis as follows:

Up to 100 units per week: $5.50 per unit

101 to 140 units per week: $5.80 per unit

141 to 160 units per week: $6.00 per unit

The higher rate applies to the additional units produced only.

Last week Vik produced 149 units.

What was Vik’s gross pay $ for last week?

Labour costs for a period in production cost centre P1 include:

Gross wages of direct operatives:

Normal hours $76,200

Overtime hours (at a premium of 50% over the normal rate) $9,600

Gross wages of indirect operatives:

Normal hours $14,300

Overtime hours (at a premium of 50% over the normal rate) $1,650

Overtime is worked as necessary to satisfy seasonal sales demand.

What amount of the above labour costs would be charged to production overhead?

• $19,150

• 1. $15,950

• $25,550

• 1. $15,400

During a production run, the total direct labour costs for a product in cost centre P2 are as follows:

Gross wages of direct operatives:

Normal hours $50,000

Overtime hours (at a premium of 25% over the normal rate) $12,500

Gross wages of indirect operatives:

Normal hours $10,000

Overtime hours (at a premium of 25% over the normal rate) $2,500

What amount of the above labour costs would be charged to production overhead?

• 1. $10,000

• 1. $12,500

• $15,000

• $20,000

Emma typically works 35 hours a week at a rate of $25 per hour. Last week, she worked an additional four hours of overtime at double her normal rate due to an urgent project requirement.

What portion of Emma’s wages should be classified as direct costs?

• 1. $1,000

• 1. $1,050

• $900

• $875

David earns $15 per hour for a standard 40-hour work week. If he works 10 hours of overtime in a week due to increased demand, and overtime is paid at time and a half, how should the $150 earned from overtime be categorized?

• The entire $150 is treated as an indirect cost

• $100 is treated as an indirect cost, $50 as a direct cost

• The entire $150 is treated as a direct cost

• $100 is treated as a direct cost, $50 as an indirect cost

What is a direct cost?

• The element of overtime paid at the basic rate to direct employees

• A general overtime premium

• Payment for idle time

• Holiday pay

What is the correct entry to record direct labour costs?

• Debit wages control

  Credit work in progress

• Debit wages control

  1. Credit production overhead control

• Debit production overhead control

  Credit wages control

• 1. Debit work in progress

     Credit wages control