Mario Garcia is paid $20 an hour for straight-time and $30 an hour for overtime. One week she worked 42 hours, which included 2 hours of overtime. Compensation would be reported as:
A)$800 of direct labor and $60 of manufacturing overhead
B)$800 of direct labor and $0 of manufacturing overhead
C)$840 of direct labor and $20 of manufacturing overhead
D)$860 of direct labor and $0 of manufacturing overhead

Question

Quizplus · Accepted Answer

To calculate the compensation, we first need to determine the number of straight-time and overtime hours worked by Mario.

Straight-time hours = Total hours worked - Overtime hours = 42 - 2 = 40

Compensation for straight-time hours = 40 hours x $20/hour = $800

Compensation for overtime hours = 2 hours x $30/hour = $60

Therefore, the total compensation for Mario is $860.

Since Mario's compensation is a direct labor cost, it would be recorded as part of the Cost of Goods Sold (COGS) on the income statement, and not as a manufacturing overhead cost. Hence, option C is the best choice.

Mario Garcia Is Paid $20 an Hour for Straight-Time and $30