Direct and Indirect Labor
Highlander Cutlery manufactures kitchen knives. One of the employees, whose job is to cut out wooden knife handles, worked 48 hours during a week in January. The employee earns $12 per hour for a 40-hour week. For additional hours, the employee is paid an overtime rate of $16 per hour. The employee's time was spent as follows:
Regular duties involving cutting out knife handles | 38 hours |
General shop cleanup duties | 9 hours |
Idle time due to power outage | 1 hour |
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. Manufacturing overhead (idle time)
c. Manufacturing overhead (overtime premium)
d. Manufacturing overhead (indirect labor)
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