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Relevant costs for Labour–>No spare capacity–>Can’t hire additional labour
–>Use existing employees work overtime
–>RC = extra wages cost incurred during overtimeEg, Labour need to work for 4 hours, usually paid at £2, overtime is paid at a time and half. what’s the relevant cost for labour?
RC= 4 hours * £2 * 0.5 = £4 (1)
OR
RC= 4 hours *£2 * 1.5 = 12 (2)
Which one is correct? Thanks in advanceThe second answer is correct. You are paying them for extra work – normally it would be at $2 per hour, but if you are paying them ‘time and a half’ then you will be paying them $3 per hour.
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RC= 4 hours *£2 * 1.5 = 12 (2)
this one correct
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