Direct labour is often accounted for at the gross wage rate, and the related benefit costs such
Question:
Direct labour is often accounted for at the gross wage rate, and the related “benefit costs” such as employer payroll taxes and employer contributions to health care plans are accounted for as part of overhead. Suppose Amy O'Keefe, a direct labourer, works 40 hours during a particular week as an auditor for a public accounting firm. She receives $18 gross pay per hour plus related benefit costs of $10 per hour.
1. What would be the cost of O’Keefe’s direct labour? Of related general overhead?
2. Suppose O’Keefe works 30 hours for Client A and 10 hours for Client B, and the firm allocates costs to each client. What would be the cost of O’Keefe’s direct labour on the Client A job? The Client B job?
3. How would you allocate general overhead to the Client A job? The Client B job?
4. Suppose O’Keefe works a total of 50 hours (30 for A and 20 for B), 10 of which are paid on the basis of time-and-a-half. What would be the cost of O’Keefe’s “direct labour” on the Client A job? The Client B job?
The addition to general overhead?
Step by Step Answer:
Management Accounting
ISBN: 9780367506896
5th Canadian Edition
Authors: Charles T Horngren, Gary L Sundem, William O Stratton, Howard D Teall, George Gekas