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December 28, 2022 at 1:15 pm
Hello, thank you very much for this worked example.
Could you please help me to understand how the cost of labour is reflected in the £174k? You remove £40k for labour when calculating the opportunity cost of reducing work in the other production department. Is labour considered a fixed cost over the year, and therefore committed and not relevant?
John Moffat says
November 8, 2020 at 9:55 am
The 150k has been ‘lost’ whether or not they go ahead. It is better to only lose 24K than to have lost 150K
November 7, 2020 at 5:48 pm
Hi there, thanks very much for this video. I just wanted to ask, if £150k was already spent to date and the cost to continue for one more year is £174k =£324k in total, we were only being paid £300k by the government therefore I thought it would be a £24k loss therefore would not proceed? Many thanks
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