Chapter 2, Problem 2.43P

Labor cost, overtime, and idle time. David Letterman works in the production department of Northeast Plastics (NEP) as a machine operator David, a long-time employee of NEP, is paid on an hourly basis at a rate of $24 per hour. David works five 8-hour shifts per week Monday–Friday (40 hours). Any time David works over and above these 40 hours is considered overtime for which he is paid at a rate of time and a half ($36 per hour). If the overtime falls on weekends, David is paid at a rate of double time ($48 per hour). David is also paid an additional $24 per hour for any holidays worked, even if it is part of his regular 40 hours. David is paid his regular wages even if the machines are down (not operating) due to regular machine maintenance, slow order periods, or unexpected mechanical problems. These hours are considered “idle time.”

During December David worked he following hours:

	Hours worked including machine downtime	Machine downtime
Week 1	50	6.0
Week 2	44	2.0
Week 3	46	4.0
Week 4	45	3.5

Included in the total hours worked are two company holidays (Christmas Eve and Christmas Day) during Week 4. All overtime worked by David was Monday–Friday, except for the hours worked in Week 3; all of the Week 3 overtime hours were worked on a Saturday.

1. 1. Calculate (a) direct manufacturing labor, (b) idle time, (c) overtime and holiday premium, and (d) total earnings for David in December.
2. 2. Is idle time and overtime premium a direct or indirect cost of the products that David worked on in December? Explain.