Greg Powers is employed by Gussie Company, where he assembles a component part for one of the company’s products. Greg is paid $14 per hour for regular time, and he is paid time and a half (i.e., $21 per hour) for all work in excess of 40 hours per week.

Required:

1. Assume that during a given week Greg is idle for three hours due to machine breakdowns and that he is idle for two more hours due to material shortages. No overtime is recorded for the week. Allocate Greg’s wages for the week between direct labour cost and manufacturing overhead cost.

2. Assume that during a following week Greg works a total of 49 hours. He has no idle time for the week. Allocate Greg’s wages for the week between direct labour cost and manufacturing overhead cost.

3. Greg’s company provides an attractive package of benefits for its employees. This package includes a retirement program and a health insurance program. Explain two ways that the company could handle the costs of its direct labourers’ employee benefits in its cost records.