A factory incurred overtime wages under the following

Solution

Overtime cost treatment will differ based the situation as follows: ·        Overtime for Specific or urgent job - If overtime is due to urgent, specific customer orders, or directly traceable to a particular order, the entire cost (regular pay + premium) is directly charged to that job. In such case, it will be a direct cost and form part of prime cost ·        Overtime for general production - If overtime arises from general production bottlenecks, seasonal demand, or inefficient scheduling, or labour shortage, it is often treated as indirect labor and charged to factory overhead, not prime cost. Abnormal Reasons: If overtime is caused by issues like machine breakdown, it is considered an abnormal cost and charged to the Costing Profit & Loss Account, excluded from both prime cost and overheads.