AAT Cash Management Solution to Sample Assessment 1 Task 3b-Labour Costs-Further Explanation

ManiGoldwater

Solution:
Here we need to calculate both standard labour cost and overtime for hourly paid employees.
In addition we also need to calculate supervisors' salary for each period.

So, to calculate standard labour cost we will multiply Standard Rate of £11 with standard hours given above.
Here is how we will do this:



Now, we need to calculate labour cost for overtime hours worked in each period.
So, overtime rate of £14 will be multiplied with overtime hours given in the questions.
However, we need to remember that all overtime payments are paid in the following period.
Hence, we will enter computed payments in the next period instead of the same period.
For example, Period 1 Payments of £14 × 250 hours = £3,500 will be entered in period 2 (see below) and so on.



Now, if we put both standard and overtime labour costs together, our calculations will look like as shown below:



But we still have to take into account supervisors' salary.
Remember, there are two supervisors, each earning £26,000.
Hence, total salary will be £26,000 × 2 supervisors = £52,000.
Now, if we look at the question carefully, we will notice that it is telling us that "the year is divided into 13, four week periods".
Here, number of weeks per period (4 weeks in every period) is irrelevant.
This is because the question requires us to do our calculations in periods and not in weeks.
So, we will divide £52,000 by 13 periods which will give us £4000 per period.
Now, we will put supervisors' salary in the grid under standard and overtime labor costs as shown below:



I hope the above explanation clarifies this question.
Please do correct me if I am wrong at any point.

Best Regards,

Mani Goldwater