Question

Mr. Foxhound works at a manufacturing plant that makes balloons for holiday parades. He earns $30 per hour for straight-time and $50 per hour for overtime .

One week he worked 46 hours, which included 6 hours of overtime, and 4 hours of idle time caused by a shortage of materials to make the balloons.
Required:
Compute Mr. Foxhound’s total compensation for the week; the amount of compensation reported as direct manufacturing labor; and the amount of compensation that would be reported as manufacturing overhead.
A) $1,200; $1,100; $220
B) $1,250; $1,200; $160
C) $1,500; $1,260; $240
D) $1,600; $1,280; $260
E) $1,750; $1,300; $280

Answer 1

Straight time rate=$30 per hour

Hours worked on straight time=46-6=40

Idle time=4 hours

Straight time worked as direct labor=40-4=36

Straight time direct labor cost=36*30=$1,080

Straight time overhead cost=4*30=$120

Overtime hours=6

Overtime rate=$50 per hour

Direct labor hour rate=$30 per hour

Balance (50-30)=$20 per hour is overhead

Direct labor cost during overtime=30*6=$180

Total Direct labor cost=1,080+180=$1,260

Overhead cost:

Idle time=$30*4=$120

Overtime =$20*6=$120

Tota; Overhead Cost=$240

Total Compensation for the week=1260+240=$1,500

Other way of analyzing:

Direct labor rate=$30 Per hour

Hours worked=46-4=42

Reported direct manufacturing labor=$30*42=$1,260

Total Compensation =40*30+6*50=$1,500

Manufacturing Overhead cost = 1500-1260=$240

C) $1,500,$1,260,$240