Woodlands Restaurant Supply operates in two shifts, paying a late-shift premium

Question

Woodlands Restaurant Supply operates in two shifts, paying a late-shift premium of 10 percent and an overtime premium of 75 percent. The May 2010 payroll follows:

Total wages for 6,000 hours - $54000
Normal Hourly employee wage - $9
Total regular hours worked, split evenly between the shifts - 5,000

All overtime was worked by the early shift during May. Shift and overtime premiums are considered part of overhead rather than direct labor.

a. How many overtime hours were worked in May?
b. How much of the total labor cost should be charged to direct labor? To overhead?
c. What amount of overhead was for second-shift premiums? For overtime premiums?

Explanation / Answer

a) Overtime hours worked in May = 6000 - 5000 =1000 hrs b) Direct labor = 6000*9 = $54000 In normal / first shift, Overhead premium = 1000 *9 * 75% = $6,750 c) For second shift : Overhead premium = 9 * 75% = $ 6.75 per hour Late shift premium = 9*10% =$0.9 per hour Overtime premium for second shift = 7.65 per hour

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