ICANManagement InformationMaterial, Labour and Overhead Costing2024

Kano Textiles Limited pays its workers a basic wage of ₦800 per hour for a standard 40-hour week. Overtime is paid at time-and-a-half. In a particular week, a direct worker worked 48 hours. The 8 overtime hours were due to general production scheduling (not at a specific customer's request). How much of the overtime premium should be classified as production overhead?

A₦3,200CORRECT
B₦4,800
C₦6,400
D₦9,600
AI
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Why the answer is A, and why the others tempt you.
When overtime is not at a customer's specific request, only the overtime premium (not the basic rate) is treated as overhead. Overtime premium per hour = ₦800 × 0.5 = ₦400. Total overtime premium = 8 hours × ₦400 = ₦3,200. The basic pay for all 48 hours remains classified as direct labour cost.
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