Question

In: Accounting

Which of the following is correct? Select one: a. Overtime premiums should be treated as a...

Which of the following is correct?

Select one:

a. Overtime premiums should be treated as a component of Direct labour

b. overtime premium should be accounted for as a special type of loss.

c. Idle time should be treated as a component of manufacturing overhead.

d. Both "a" and "c" are correct

Solutions

Expert Solution

Overtime premiums are the extra pay given to the workers for working extra hours. Overtime premiums are additional labor costs so should be included in Manufacturing overhead and not to the Direct labor costs. Cost of idle time should also be treated as an indirect labor costs. so, it has to be included in Manufacturing overhead costs.

Idle time = Total time spent by worker - Actual time spent in production

So, Idle time should be treated as a component of manufacturing overhead.

Option 'C' is correct


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