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The labour costs relate to payments made to employees that will be directly involved in producing the PSMD. These employees have no work at present and, if the PSMD is not produced, they will be made redundant immediately at a cost of $230,000. If, however, the PSMD is produced, the employees are likely to be found other work at the end of the four-year period and so no redundancy costs will be incurred.
My question is that in this since labours are idle so relevant saving in cost should only be the redudancy cost saved right? Then why in the answer they have also considered the labour cost as relevant?
As a result of decision to produce the redundancy costs are not undertaken so this has a direct impact on the decision.
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