Page 235 - P1 Integrated Workbook STUDENT 2018

Answers

Skilled labour

Is there spare capacity? – Yes, for half of the hours. These will have a nil
relevant cost.

The remaining 2,000 hours need to be valued.

Can additional labour be hired? – Yes, via overtime

Relevant cost = direct labour cost. This will be the overtime cost of $12 per
hour

Total relevant cost = $12 × 2,000 hours = $24,000

Unskilled labour

Is there spare capacity? – No

Can additional labour be hired? – No

Relevant cost = direct labour cost plus forgone contribution = $6 + ($25 – $15
– $6) = $10 per hour

Total relevant cost = $10 × 3,000 hours = $30,000

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