Question

A manufacturing firm is very busy and overtime is being worked. What would the amount of overtime premium contained in direct wages normally be classed as?

Answer 1

The amount of overtime premium contained in direct wages normally be classed as "Factory overheads".

Explanation:

Overtime premium is often listed as plant overhead, unless it is: Operated on a customer's particular request to conclude his order. Worked periodically in the normal course of operations by a manufacturing department, in which case it is generally integrated into the hourly wage for direct labour.

Overhead production involves items like electricity needed to power factory equipment, factory machinery and construction depreciation, factory supplies, and factory workers other than direct labour. The overhead for a company applies to all non-labor associated expenses, which excludes production or shipping related costs. Payroll costs involving salary, employee insurance and liability.