Greg Powers is employed by the Gussie Company, where he assembles a component pa
ID: 2461324 • Letter: G
Question
Greg Powers is employed by the Gussie Company, where he assembles a component part for one of the company’s products. Greg is paid $14 per hour for regular time, and he is paid time and a half (i.e., $21 per hour) for all work in excess of 40 hours per week.
1. Assume that during a given week Greg is idle for three hours due to machine breakdowns and that he is idle for two more hours due to material shortages. No overtime is recorded for the week. Allocate Greg’s wages for the week between direct labour cost and manufacturing overhead.
2. Assume that during a following week Greg works a total of 49 hours. He has no idle time for the week. Allocate Greg’s wages for the week between direct labour cost and manufacturing overhead cost.
3. Greg’s company provides an attractive package of benefits for its employees. This package includes a retirement program and a health insurance program. Explain two ways that the company could handle the costs of its direct labourer’s employee benefits in its cost records.
Explanation / Answer
Ans 3 Two ways the company accounts for employee benefits:
a) Employee benefit cost for direct labour is added to the base rate of direct labour in calculation of direct labour cost.
b) Employee benefit cost for indirect labour cost such as idle time, overhead are classified as manufacturing/indirect overhead.
Ans 1 Manufacturung overhead- Idle time comes/treated as manufacturing overhead Direct Labour Cost 35*14 490 Manufacturing Overhead 5*14 70 Total cost $560 Ans 2 In manufacturing overhead we will take overtime cost excess of normal income rate Direct Cost 49*14 686 Manufacturing Overhead (49-40)*7 63 Total cost $749Related Questions
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