CMA Intermediate · Cost Accounting · Employee Costs
Kaveri Textiles has a worker whose basic pay is ₹20,000 per month and DA is ₹5,000. The worker works 200 hours in a month, of which 20 hours are overtime paid at double the normal rate (premium = extra over normal rate). Normal hours are 180 and the hourly rate is based on basic plus DA divided by 180 normal hours. Overtime is due to a customer's urgent order. Total wages including overtime and the amount charged directly to that customer's job are to be found. Which is the amount chargeable to the job as employee cost for overtime hours including premium?
The amount is ₹5,555.56. The hourly rate is 25,000 divided by 180, or ₹138.89, and overtime at double rate is 20 hours times ₹277.78. Because the overtime was caused by the customer's urgent order, the entire amount including premium is charged directly to that job.
- A₹5,555.56Correct
- B₹5,000.00
- C₹2,777.78
- D₹2,500.00
Explanation
Hourly rate = 25,000/180 = 138.89. Overtime at double rate = 20 × 277.78 = 5,555.56. Since overtime arises from the customer's specific request, the full amount including premium is charged to that job. ₹2,777.78 is only the normal rate part of overtime, and ₹2,500 is wrong base.
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