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A company is planning to bid for a one-month contract. It has sufficient spare labour and machine capacity to carry out the contract without affecting other activities. Costs associated with the contract would be as follows:
Direct materials
12,440
Direct labour
18,300
Variable overheads
6,020
Depreciation
2,000
In addition, it is estimated that a supervisor will need to spend 50% of their time on that contract. The supervisor is paid $3,500 a month.
What is the relevant cost of the contract?
??$18,460
??$12,440
??$20,210
$14,190I have understand everything
but have a doubt on supervisory cost, like they spend 50% of their time on the contract means they need to be paid half of $3500
so $1750 supervisory cost in relevant yeah
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