Question:
Tidy House produces a variety of household products. The firm operates 24 hours per day with three daily work shifts. The first-shift workers receive "regular pay." The second shift receives an 8 percent pay premium, and the third shift receives a 12 percent pay premium. In addition, when production is scheduled on weekends, the firm pays an overtime premium of 50 percent (based on the pay rate for first-shift employees). Labor premiums are included in overhead. The October 2010 factory payroll is as follows:
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Total wages for October for 32,000 hours
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$435,600
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Normal hourly wage for first-shift employees
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$12
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Total regular hours worked, split evenly among the three shifts
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27,000
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a. How many overtime hours were worked in October?
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 and third-shift premiums? For overtime premiums?