ICSAN Management Accounting Practice Questions - ICSAN Professional Programme I - Management Accounting Exam

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A direct factory worker is paid an overtime premium. In which of the following circumstances would this overtime premium be classified as a direct cost?

When the overtime is worked at the specific request of a customer to complete a special rush job. When the overtime is worked due to general labour shortages in the local industrial area. When the overtime is due to machine breakdown in the preceding production line. Overtime premiums are always classified as indirect costs regardless of the circumstances.

Correct Answer:

When the overtime is worked at the specific request of a customer to complete a special rush job.

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