ACCT327 Lecture Notes - Lecture 2: Fixed Cost
14 Feb 2020
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Each widget requires of direct materials, plus one hour of direct labor. Our direct labor workers are paid per hour. For simplification, we will assume that overhead gets charged to production on the basis of the number of units produced during a time period (one week). Also assume that we are only looking at one worker, john doe. For any time that he works above 40 hours, he gets paid time-and-a-half, or per hour. The regular overhead cost per week is , and we will assume that this is a fixed cost (again, for simplification purposes). We are using actual costing to assign costs to units, based on a time period of one week. John works 40 hours and produces 40 widgets. John works 38 hours and produces 38 widgets. He is idle for 2 hours because the. ^mpany ran out of direct nwterials (but he still gets paid for those 24iours).
