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Under job-order costing, when a special rush order is received from a customer and employees must...

Under job-order costing, when a special rush order is received from a customer and employees must work overtime to complete the special rush order, the overtime premium is normally charged to:

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Answer #1

Overtime premium is paid to the workers for the extra time worked than the normal working hours. The extra time is paid at a higher rate than the normal time rate.

Where the overtime is worked on a specific job to meet the time schedules or to carry out specific rush orders for which extra price is recovered, then the entire labor cost (including overtime premium) can be charged as direct labor cost to that job. Labor cost will be ultimately charged to work in Process (WIP)

Thus overtime premium is normally charged to Work in Process (WIP).

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