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Gizmo Incorporated needs to work out the cost of a new contract. The contract requires two
sorts of employee:
Programmers: time needed = 2,000 hours @$30/hour
Analysts: time needed = 900 hours @ $50/hour
There is currently a shortage of analysts and if this contract is accepted, analysts will have to
be moved from other work where they generate a contribution of $80/hour, after charging their
salaries.
There is sufficient idle time amongst programmers to provide the time needed for this project.
Because programmers are skilled and scarce, the company has no intention of removing
programmers from the workforce.
What is the incremental and opportunity costs of labour that should be assigned to this
contract?
A! 117,000
B! 72,000
C! 177,000
D! 132,000Please do not simply set test questions.
Presumably the book in which you found the question also contains an answer.
You should use this forum to ask about things you do not understand!
If you watch the free lecture on relevant costing then you will have no problem.
(The answer is A: 900 x (50 + 80) )
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