Question 1(c): Learning Curve - Normal Time vs Overtime 3 5 Marks RST Co. manufactures products purely carried out by labour. It has 25 direct workers who work for 25 days a month of 8 hours a day. However, the Company may resort to overtime if required, at one and half the normal rate of wages. The Company has received an order of 8,000 units of a new product at a price of 160 to be executed within 30 days. The contract stipulates a penalty of 10,000 per day for delivery beyond 30 days. It is estimated that at the current level of efficiency, each unit requires one hour for the first 2,000 units. Company expects 90% Learning Curve for this type of work. The cost data is as under: Direct Materials 75 per unit Direct Labour (1 hour/unit) 30 per unit Variable Overhead 12 por er Direct Labour Hour Fixed Overhead 21,20,000 per month (Fixed Overheads are to be incurred evenly throughout the month) Calculate: 1. Overtime Hours if the option of overtime is exercised to avoid the penalty 2. Cost & Profit under both options, ie. to pay the penalty by working in normal hours or to work overtime to avoid penalty