DISCUSS the effect of overtime payment on productivity.
CA Intermediate · Cost and Management Accounting · MTP · May 2025
DISCUSS the effect of overtime payment on productivity.
Suggested Answer and Working Notes:
Effect of overtime payment on productivity: Overtime work should be resorted to only when it is extremely essential because it involves extra cost. The overtime payment increases the cost of production in the following ways: The overtime premium paid is an extra payment in addition to the normal rate.The efficiency of operators during overtime work may fall and thus output may be less than normal output.In order to earn more the workers may not concentrate on work during normal time and thus the output during normal hours may also fall.Reduced output and increased premium of overtime will bring about an increase in cost of production.
Topics: Employee Cost & Direct Expenses
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