Question

Assessment 1 Part 3: Computing Payroll Earnings
Scenario:
G. Smith of Central Manufacturing Company is paid at the rate of $30 an hour for an eight hour day, with time and and a half for overtime and double time for Sundays and holidays. Regular employment is on the basis of 40 hours a week, five days a week. At the end of the week, the labor time record shows the following:
Job or Indirect Labor	Su	M	Tu	W	Th	F	Sa	Total
007		6	3	2	7	7		25
009		2	5	6	3	6		22
Machine Repair	5						8	13
Total	5	8	8	8	10	13	8	60
Using the data above and the ledger below, compute Smith's total earnings for the week and a prepare the journal entry to distribute Smith's total earnings.
	Hours			x	Rate			=	Total		Account Debited
											Factory Overhead
											Expense
	Regular	Time and	Double		Regular	Time and	Double		Gross	Work In	Overtime	M & R
		a half	Time			a half	Time		Earnings	Process	Premium
Sunday indirect			5
Monday direct	8
Tuesday direct	8
Wednesday direct	8
Thursday direct	8	2
Friday direct	8	5
Saturday indirect		8
Totals	40	15	5

Answer 1

	Hours			Rate			=	Total
	Regular	Time and Half	Double Time	Regular	Time and Half	Double Time		Gross Earnings
Sunday Indirect	0	0	5	0	0	60		300
Monday Direct	8	0	0	30	0	0		240
Tuesday Direct	8	0	0	30	0	0		240
Wednesday Direct	8	0	0	30	0	0		240
Thursday Direct	8	2	0	30	45	0		330
Friday Direct	8	5	0	30	45	0		465
Saturday Indirect	0	8	0	0	45	0		360
Totals	40	15	5					$2,175

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We first need to determine the value of WIP and factory overheads, in order to make journal entries.

Work in Process = Gross Earnings - Indirect Earnings = 2,175 - (300 + 360) = $1,515

Factory Overhead = Sunday Indirect + Saturday Indirect = 300 + 360 = $660

Now, we can prepare the journal entry as below:

Account Titles	Debit	Credit
Work in Process	$1,515
Factory Overhead	$660
Payroll Expense		$2,175

______

Notes:

Since Saturday is not considered to be a holiday, overtime is calculated at 1.5 times of the normal rate.