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?
J
John MoffatTutor·
The 150k has been 'lost' whether or not they go ahead. It is better to only lose 24K than to have lost 150K
K
klang94·
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
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?