Chapter 03 – Appendix B Further Classification of Labor Costs
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Chapter 03 Appendix B Further Classification of Labor Costs Answer Key
True / False Questions
1. The overtime premium paid to factory workers is usually considered to be part of direct
labor cost.
2. Some companies classify labor fringe benefits for direct labor workers as part of the direct
labor cost and some classify these costs as manufacturing overhead.
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Multiple Choice Questions
3. If scheduling delays occur, and a particular job must be worked on during an overtime
period, the overtime premium cost would most likely be charged to:
4. The overtime premium paid to workers is usually included as a part of:
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5. Sally Smith is employed in the production of various electronic products, and earns $8 per
hour. She is paid time-and-a-half for work in excess of 40 hours per week. During a given
week she worked 45 hours and had no idle time. How much of her week’s wages would be
charged to manufacturing overhead?
6. James Andersen, an operator of a machine on the assembly line, receives time-and-a-half
for any time worked in excess of 40 hours per week. His rate of pay is $12 per hour. How
much should be charged to manufacturing overhead if he worked 46 hours last week and had
no idle time?
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7. An assembly line worker is paid $20 per hour and an extra $10 per hour for every hour over
40 that is worked in a given week. If this worker works 44 hours in a given week, how much
of her wage should be included in manufacturing overhead cost?
Wendy works on the assembly line of a manufacturing company where she installs a
component part for one of the company’s products. She is paid $20 per hour for regular time
and time and a half for all work in excess of 40 hours per week.
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8. Wendy works 45 hours during a week in which there was no idle time. The allocation of
Wendy’s wages for the week between direct labor cost and manufacturing overhead cost
would be:
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9. Wendy works 46 hours in a given week but is idle for 4 hours during the week due to
equipment breakdowns. The allocation of Wendy’s wages for the week between direct labor
cost and manufacturing overhead cost would be:
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10. Wendy’s employer offers fringe benefits that cost the company $3 for each hour of
employee time (both regular and overtime). During a given week, Wendy works 42 hours but
is idle for 3 hours due to material shortages. The company treats all fringe benefits as part of
manufacturing overhead. The allocation of Wendy’s wages and fringe benefits for the week
between direct labor cost and manufacturing overhead would be:
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11. Wendy’s employer offers fringe benefits that cost the company $3 for each hour of
employee time (both regular and overtime). During a given week, Wendy works 42 hours but
is idle for 3 hours due to material shortages. The company treats all fringe benefits relating to
direct labor as added direct labor cost and the remainder as part of manufacturing overhead.
The allocation of Wendy’s wages and fringe benefits for the week between direct labor cost
and manufacturing overhead would be:
Chuck is a quality inspector on the assembly line of a manufacturing company. He is paid
$16 per hour for regular time and time and a half for all work in excess of 40 hours per week.
He is classified as a direct labor worker.
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12. Chuck works 42 hours during a week in which there was no idle time. The allocation of
Chuck’s wages for the week between direct labor cost and manufacturing overhead cost would
be:
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13. Chuck works 47 hours in a given week but is idle for 3 hours during the week due to
equipment breakdowns. The allocation of Chuck’s wages for the week between direct labor
cost and manufacturing overhead cost would be:
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14. Chuck’s employer offers fringe benefits that cost the company $5 for each hour of
employee time (both regular and overtime). During a given week, Chuck works 45 hours but
is idle for 2 hours due to material shortages. The company treats all fringe benefits as part of
manufacturing overhead. The allocation of Chuck’s wages and fringe benefits for the week
between direct labor cost and manufacturing overhead would be:
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15. Chuck’s employer offers fringe benefits that cost the company $5 for each hour of
employee time (both regular and overtime). During a given week, Chuck works 45 hours but
is idle for 2 hours due to material shortages. The company treats all fringe benefits relating to
direct labor as added direct labor cost and the remainder as part of manufacturing overhead.
The allocation of Chuck’s wages and fringe benefits for the week between direct labor cost
and manufacturing overhead would be:
Essay Questions
Chapter 03 – Appendix B Further Classification of Labor Costs
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16. Brooke Foster is employed by Wong Laboratories, Inc., and is directly involved in
preparing and packaging the company’s leading sleep aid, RestWell. Brooke’s basic wage rate
is $15 per hour, and she is paid time and a half for any work in excess of 40 hours per week.
Additionally, Wong Laboratories provides a fringe benefit package that costs the company $5
for each hour of employee time (regular or overtime). During a recent week, Brooke worked
49 hours but was idle for 3 hours due to materials shortages.
Required:
a. Assume that Wong Laboratories treats all fringe benefits as part of manufacturing
overhead. Compute Brooke’s total wages and fringe benefits for the week and indicate how
much of her wages and fringe benefits for the week would be allocated to direct labor and
how much would be allocated to manufacturing overhead.
b. Assume that Wong Laboratories treats the part of fringe benefits related to direct labor as a
component of direct labor cost. Compute Brooke’s total wages and fringe benefits for the
week and indicate how much of her wages and fringe benefits would be allocated to direct
labor and how much would be allocated to manufacturing overhead.
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17. A direct labor worker at Gerding Corporation is paid $16 per hour for regular time and
time and a half for all work in excess of 40 hours per week. This employee works 45 hours
during a week in which there was no idle time.
Required:
Determine how much of the worker’s wages for the week would be classified as direct labor
cost and how much would be classified as manufacturing overhead cost. Show your work.
18. A direct labor worker at Damann Corporation is paid $24 per hour for regular time and
time and a half for all work in excess of 40 hours per week. This employee works 48 hours in
a given week but is idle for 3 hours during the week due to equipment breakdowns.
Required:
Determine how much of the worker’s wages for the week would be classified as direct labor
cost and how much would be classified as manufacturing overhead cost. Show your work.
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19. A direct labor worker at Cogswell Corporation is paid $22 per hour for regular time and
time and a half for all work in excess of 40 hours per week. The company’s fringe benefits
cost $7 for each hour of employee time (both regular and overtime). Last week this employee
worked 43 hours but was idle for 3 hours due to material shortages. The company treats all
fringe benefits relating to direct labor as added direct labor cost and the remainder as part of
manufacturing overhead.
Required:
Determine how much of the worker’s wages for the week would be classified as direct labor
cost and how much would be classified as manufacturing overhead cost. Show your work.
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20. A direct labor worker at Blagg Corporation is paid $14 per hour for regular time and time
and a half for all work in excess of 40 hours per week. The company’s fringe benefits cost $4
for each hour of employee time (both regular and overtime). Last week this employee worked
45 hours but was idle for 2 hours due to material shortages. The company treats all fringe
benefits as part of manufacturing overhead.
Required:
Determine how much of the worker’s wages for the week would be classified as direct labor
cost and how much would be classified as manufacturing overhead cost. Show your work.