Pcr-june 2006- Please Help!

LJ1

Hello!

I am quite new to posting messages so fingers x this ill post correctly!

Can somebody tell me why the O/T premium is not included in the cost of production overheads breakdown?

I can only see the £10 x Labour Hrs is

Probably because I'm stressing about tomorrow after PEV on Monday.

Bex

Hi there,

I am so glad you noticed that as well. I thought in the question it clearly says that the labour premium is put to production overheads and is not recorded within direct labour.

So, if this is the case surely the production overheads are the normal £10 x total labour hours + the overtime hours x the premium???

Their answer has totally omitted this though hasn't it :001_unsure:

I read it as you did though!

Bex

xx

LJ1

Yay!

I am soooo glad I am not alone on this one!

It has been bugging me all morning - I just don't get it.

My thoughts are exactly the same as yours:

Labours Hrs x £10 +

O/T Hrs x Premium

= Production Overheads

LJ X

Hunnibun

Hi, The reason that the Premium bit is allocated to Direct labour is because the overtime would not occur if it was not for the exact bit.
Hence why the premium is costed elsewhere and the standard hours are costed to overheads (they would have to pay staff standard contract regardless)

Hope that makes sense!

Fi21

PCR June 06

I'm confused as to why they've used £6 as the overtime rate per hour? It says premium of 50% so wouldn't that mean £9 per hour overtime if the standard rate per hour is £6?

Has anyone else noticed that the June 07 answers have been changed recently on the web - this is all very confusing! (Task 1.1 g)

Hunnibun

If its only 50% then it will only be half the usual amount. If its 150% that equals time and a half.
usual hour rate 6.00 with O/T being 50% = Overtime £3.00
" " " " with O/T being 150% = Overtime being £9.00
Doesnt sound quite right as no one would work OT for less than normal wage.
If youre costing overtime at time and a half the 'time' (100%) goes to Overhead costing and the remaining 'and a half' (50%) would go to Direct labour.
but.....
To be honest. I havent got to that paper but am going through them at the moment.
I will try and update with workings when I do.
x

Fi21

Yeah - so the overtime rate would be £9 per hour cos you wouldn't work for less than the standard wage.

I've just realised it says that the overtime premium is charged to prod ohds rather than the cost of direct labout which is why they've only done the overtime at direct cost of £6 per hour. Do we assume then that the £10 per hour of prod ohds is including the overtime of the extra £3?

LJ1

Hi!

Yeah that's the bit I am querying because in the Full Absorption breakdown 1.1f it only includes the Hrs worked x £10.

I would have thought it was Hrs worked x £10
+ O/T Premium for each product

= Production Overheads

I understand why the Labour cost 1.1e doesn't include the premium as it states charged to production Overheads just 1.1 f breakdown of the overheads is confusing me.

mehmet

Yes.

They would have taken into account a budgeted cost of overtime in the total budgeted overheads used to calculate the OAR.

LJ1

That's great thank you!

Fi21

Hummm...!

I think we should assume the £10 includes overtime although it should really be separated or stated in the question

mehmet

Don't mean to sound too harsh, but it is stated.

The question clearly says Overheads are absorbed at the rate of £10 per labour hour.