Question

Lauren Clark works for a pottery shop. She works 40-hour weeks (5 days) and gets paid $25 per hour. If she exceeds her normal 40 hours, she gets paid time and a half. On the first week of the year, she worked a total of 38 hours but got paid 46 hours because the 1st day of the year the pottery was closed but she still got paid for the day. The following 4 days, she stayed 1.5 hours overtime per day. How much of her pay would be considered direct labor and indirect labor respectively? A. $800 ; 425 B. $950 ; 275 C. $1,000 ; 275 D. $950 ; 425

Answer 1

Answer:

D. $950;425

Explanation:

Before solving the problem, it is convenient to define the concepts of direct labor and indirect labor. The former is the worker's productive labor, such as operation of machinery, manufacture of products or customer service. In the example, direct labor equals the 38 hours that Lauren Clark really worked, for which she was paid $ 950 (38 multiplied by the pay that is $25).

For its part, indirect labor is not related to the transformation of inputs into finished products, but is still recorded in the company's accounting. Lauren Clark, in addition to the 38 hours she actually worked, was paid an additional eight hours in which she did not perform any activity, because the shop was closed. So, these 8 hours can be considered as non-productive or indirect labor. In monetary terms, this equals $200 (8 multiplied by $25).

Moreover, Lauren Clark worked 1.5 additional hours for four days, which allowed her to exceed her 40 normal hours and thus be able to access a bonus. This incentive is not directly associated with goods transformation processes, so it also constitutes indirect labor. In monetary terms, this equals $225:

$225 = (1.5*4)*37.5$

Here, the number of additional hours worked was multiplied by the number of days (1.5 * 4), and this product was multiplied by the salary, which in this case is 37.5, since for these additional hours you are paid a salary and a half.

Therefore, the total indirect labor is $425.