The Acme Company lost 650 hours due to accidents on the job in the first quarter of the year. The average hourly wage of the employees who contributed to the lost hours was $15.00. The company benefits add 25% to the wages. Using the cost-of-lost-hours formula (employee hours lost X average loaded labour rate = cost), calculate the direct cost of the lost work hours. Discuss the approach you would use to estimate the hidden costs that would also be associated with the lost hours. Your answer must be at least 200 words in length.

Step-by-step explanation:

Given that ;

The Acme Company lost 650 hours due to accidents on the job in the first quarter of the year

The average hourly wage of the employees who contributed to the lost hours was $15.00 . i.e the direct labor cost = $15.00

The company benefits add 25% to the wages. = 0.25

The loaded labor cost = $15.00/hr × 0.25 = $3.75/hour

If we add the additional cost of benefit, then we have the loaded labor cost to be =  $15.00/hour + $3.75/hour

= $18.75 / hour

However, the direct labor costs that the workers continued to receive without working. for the  first quarter of the year by using the cost-of-lost-hours formula is  :

= 650 hours × $15.00 / hours

= $9750

The hidden costs can be estimated from the Acme company's contributions to the employee. Given that the company benefits add 25% to the wage of the employee, therefore, this wage must be incorporated in order to find out the total wage cost for the lost work hours in the Acme company.

As a result of the company benefits, the fully loaded labor cost is 650 hours  × $18.75 /hour which gives $12187.5.

Consequently, it is pertinent to determine the cost for  additional benefits that the workers are receiving even though they are not working, this is achieved by the difference in the $9750 direct cost paid to labor and the benefits amount of $12187.5

i.e

the cost for additional benefits that the workers are receiving even though they are not working = $12187.5 - $9750 = $2437.5

Other ways the hidden cost can be estimated is by take note of the amount paid to the employee on the day the employee had  an emergency, amount paid to the rescue team involved. etc

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