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Labor cost, overtime, and idle time. David Letterman works in the production department of Northeast Plastics (NEP) as a machine operator David, a long-time employee of NEP, is paid on an hourly basis at a rate of $24 per hour. David works five 8-hour shifts per week Monday–Friday (40 hours). Any time David works over and above these 40 hours is considered overtime for which he is paid at a rate of time and a half ($36 per hour). If the overtime falls on weekends, David is paid at a rate of double time ($48 per hour). David is also paid an additional $24 per hour for any holidays worked, even if it is part of his regular 40 hours. David is paid his regular wages even if the machines are down (not operating) due to regular machine maintenance, slow order periods, or unexpected mechanical problems. These hours are considered “idle time.”
During December David worked he following hours:
Hours worked including machine downtime | Machine downtime | |
Week 1 | 50 | 6.0 |
Week 2 | 44 | 2.0 |
Week 3 | 46 | 4.0 |
Week 4 | 45 | 3.5 |
Included in the total hours worked are two company holidays (Christmas Eve and Christmas Day) during Week 4. All overtime worked by David was Monday–Friday, except for the hours worked in Week 3; all of the Week 3 overtime hours were worked on a Saturday.
- 1. Calculate (a) direct manufacturing labor, (b) idle time, (c) overtime and holiday premium, and (d) total earnings for David in December.
- 2. Is idle time and overtime premium a direct or indirect cost of the products that David worked on in December? Explain.
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Chapter 2 Solutions
EBK HORNGREN'S COST ACCOUNTING
- R. Herbert of Crestview Manufacturing Co. is paid at the rate of 20 an hour for an eight-hour day, with time-and-a-half for overtime and double-time for Sundays and holidays. Regular employment is on the basis of 40 hours a week, five days a week. At the end of a week, the labor time record shows the following: Because jobs are randomly scheduled for the overtime period, any overtime premium is charged to Factory Overhead. a. Compute Herberts total earnings for the week. b. Present the journal entry to distribute Herberts total earnings. (Note: These single journal entries here and in E3-2, E3-3, E3-4, E3-8 and E3-9 are for the purpose of illustrating the principle involved. Normally, the entries would be made for the total factory payroll plus the administrative and sales payroll.)arrow_forwardDavid Letterman works in the production department of Northeast Plastics (NEP) as a machine operator. David, a long-time employee of NEP, is paid on an hourly basis at a rate of $24 per hour. David works five 8-hour shifts per week Monday–Friday (40 hours). Any time David works over and above these 40 hours is considered overtime for which he is paid at a rate of time and a half ($36 per hour). If the overtime falls on weekends, David is paid at a rate of double time ($48 per hour). David is also paid an additional $24 per hour for any holidays worked, even if it is part of his regular 40 hours. David is paid his regular wages even if the machines are down (not operating) due to regular machine maintenance, slow order periods, or unexpected mechanical problems. These hours are considered “idle time.” During December David worked the following hours: Included in the total hours worked are two company holidays (Christmas Eve and Christmas Day) during Week 4. All overtime worked by David…arrow_forwardMelissa Grossman is the manager of a video store and earns $9.50 per hour with time-and-a-half for overtime and double-time on Sundays. What is Melissa's total gross pay for last week, if she worked 43 hours Monday through Saturday, plus a 5-hour shift on Sunday?arrow_forward
- Compute the average hourly cost of a carpenter to a contractor.Assume the work is in a subsistence area and thedaily subsistence rate is $19.50. The carpenter works thesecond shift on a two-shift project where a project laborcontract establishes a “work 7 pay 8 hour” pay basis forstraight time. He works 6 days, 10 hours a day. In additionto time and a half for overtime Monday through Friday, thecontract calls for double time for all work on weekends.Use 6.2% FICA and 5.0% for unemployment insurance.Assume all data relating to the WC, PL, PD, fringes, andwage are as given in Table 16.5.arrow_forwardEmployee A is a carpenter and normally works 36 hours per week. The standard rate of pay is $3.60 per hour. A premium of 50% of the basic hourly rate is paid for all overtime hours worked. During the last week of October, Employee A worked for 42 hours. The overtime hours worked were for the following reasons: Machine breakdown: 4 hours To complete a special job at the request of a customer: 2 hours How much of Employee A's earnings for the last week of October would have been treated as direct wages? A $162.00 B $129.60 C $140.40 D $151.20arrow_forwardLem Company pays time and a half for hours in excess of 40 hours per week. If an individual is paid P60 per hour and work 44 hours a week, what is the amount direct labor:arrow_forward
- Morris Lann works for Talbert Electronics. He is a shared employee; he works in the manufacturing department and has been trained to work the sales counter when needed. He was asked to work the sales counter for two days, five hours each day during other employees' vacations. When he works in the manufacturing department, he earns $16.50 per hour. Morris earns a $2.50 pay differential for working the sales counter. He worked a total of 39 hours and 30 minutes during the week. Morris is married filing joint with no dependents. Compute Morris’s pay for the week ending August 20 using the hundredth-hour system. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)arrow_forwardDeborah's employer offers fringe benefits that cost the company P3 for each hour of employee time (both regular and overtime). Her regular wage rate is P70 per hour while her overtime rate is P17.50/hour. During a given week, Deborah works 42 hours but is idle for 3 hours due to material shortages. The company treats all fringe benefits as part of manufacturing overhead. The allocated of Deborah's wages and fringe benefits for the week for the direct labor cost will be:arrow_forwardLawrence Lippart is a line worker in the assembly department of Myers Manufacturing. He normally earns $18 per hour, but gets time and a half ($27 per hour) for overtime, over 40 hours per week. He earns double time if he works holidays even if he has not worked 40 hours that week. Sometimes the assembly-line equipment goes down and Lawrence has to wait for the mechanics to repair the equipment or there is a scheduling mix-up. Lawrence is paid for this time and Myers considers this idle time. In May, Lawrence worked two 43-hour weeks, one 44 hour week, and the last week he worked 40 hours, but one of those days was a national holiday. During regular hours, the assembly-line equipment was down 4.2 hours in May, and Lawrence had two hours of idle time because of a scheduling mix-up. Requirements 1. Calculate (a) direct manufacturing labour, (b) idle time, (c) overtime holiday premium, and (d) total earnings for Lawrence in May. (Round your answers to the nearest cent.) 2. Is idle time…arrow_forward
- Marrell is employed on the assembly line of a manufacturing company where she assembles a component part of one of teh company's products. She is paid P16 per hour for regular time and time and a half for all work in excess of 40 hours per week. Marrell works 50 hours in a given week but is idle for 4 hours during the week to equip breakdowns. The allocation of Marrell's wages for the week for direct labor is;arrow_forwardThe regular working days in a factory are Monday to Friday. Pete and Bec who are being paid 25 and 27 per hour, respectively, worked on Jobs 31 and 32 for the period August 4 to 10. The weekly time records and summary of the job tickets show the following: Total number of hours time in: Pete = 45, Bec = 43; Overtime: Pete = 6, Bec = 5; Expended on the jobs: No 31: Pete = 26, Bec = 17; No. 32: Pete = 20, Bec = 21. Pete was authorized to work on overtime on job no. 31 because of its rush nature; Bec had to work on overtime on job no. 32 to make up for a machine breakdown during the week. Overtime premium is 25%. Factory overhead is 60% of direct labor cost and materials cost comprises 80% of total production cost. What should be the respective production costs of job nos. 31 and 32?arrow_forwardEmployees at Pete's Packaging earn time-and-a-half pay for all hours worked beyond 40 hours. Last week an employee worked a total of 65 hours. How much overtime pay did the employee earn if his regular pay rate is $12.28 per hour?arrow_forward
- Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
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