Bob 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.
-Bob's employer offers fringe benefits that cost the company $4 for each hour of employee time (both regular and overtime). During a given week, Bob 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 Bob's wages and fringe benefits for the week between direct labor cost and manufacturing overhead would be:
A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question

Bob 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.
-Bob's employer offers fringe benefits that cost the company $4 for each hour of employee time (both regular and overtime). During a given week, Bob 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 Bob's wages and fringe benefits for the week between direct labor cost and manufacturing overhead would be: 
A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D

Quizplus · Accepted Answer

Bob's wages for the week would be calculated as follows:

Regular time = 40 hours x $16/hour = $640 
Overtime = 5 hours x $16/hour x 1.5 = $120 
Total wages = $640 + $120 = $760

The company's cost for fringe benefits would be: 
$4/hour x 45 hours = $180

Therefore, the total cost to the company for Bob's wages and fringe benefits would be: 
$760 + $180 = $940

Since Bob is a direct labor worker, his entire cost ($760) would be classified as direct labor cost, and the cost of fringe benefits ($180) would be classified as manufacturing overhead.

Thus, the allocation of Bob's wages and fringe benefits for the week between direct labor cost and manufacturing overhead would be:

Direct labor cost = $760 
Manufacturing overhead = $180

Therefore, the correct choice is B.

Bob Is a Quality Inspector on the Assembly Line of a Manufacturing