Highlander Cutlery manufactures kitchen knives. One of the employees, whose job is to cut out wooden...
Highlander Cutlery manufactures kitchen knives. One of the employees, whose job is to cut out wooden knife handles, worked 53 hours during a week in January. The employee earns $16 per hour for a 40-hour week, and overtime is paid after 40 hours. For additional hours the employee is paid an overtime rate of $21 per hour. The employee’s time was spent as follows:
| Regular duties involving cutting out knife handles | 45 | hours |
| General shop cleanup duties | 5 | hours |
| Idle time due to power outage | 3 | hours |
Required:
1. Calculate the total cost of the employee’s wages during the week described above.
2. Determine the portion of this cost to be classified in each of the following categories:
a. direct labor
b. manufactoring overhead (idle time)
c. manufacturing overhead (overtime premium)
d manufactoring overhead (indirect labor)
total cost of wages:
Homework Answers
- Total cost of employees wages will be as follows:
- Total no. of hours worked is 53 hours.
- Wages rate for 40 hours is $16 / hour And $ 21 for over time
- So, total cost will be. (40*16 ) + ( 13*21 ) = (640+273 ) = $ 913.
- Portion of cost to be classified in each category is
- Manufacturing overhead (idle time) = (Total cost/total hours ) X (idle hours ) = ($913/53) X 3 = $ 51.68.
- Manufacturing overhead (overtime premium ) is numbers of hours exceeding 40 hours multipled by $21.
So, overtime premium = (53-40) X 21 = $273.
- Manufacturing overhead (indirect wages) = 5 hours of general clean up duties .
So, it will also be calculated similar to idle time cost i.e
(Total cost / total hours) X cleanup hours. = (913/53) X 5 = $86.13.
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