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Help! Dec 2011 q1

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Help! Dec 2011 q1

  • This topic has 1 reply, 2 voices, and was last updated 11 years ago by John Moffat.
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  • May 7, 2014 at 11:26 am #167752
    Olivia
    Member
    • Topics: 2
    • Replies: 0
    • ☆

    Please help! In dec 11 q1 in point 2, why is the relevant cost $500 and not $200? Ie 40 hours x $5? Wouldn’t you want the minimum cost for the client?

    Thanks

    May 7, 2014 at 11:40 am #167755
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54718
    • ☆☆☆☆☆

    If they take the engineers of the job then they will have to pay the penalty of $500 whatever happens because the job will not be finished on time.

    If it also meant that they lost the job completely, then they would lose the contribution as well as losing the $500. However, because they are able to complete the job later, they will still be getting the contribution and so the only extra cost will be the penalty for being late.

    (Incidentally, if they did lose the job and therefore lost the contribution as well as having to pay the penalty, then the lost contribution would be $400 (not $200) because it is two engineers x 40 hours x $5 per engineer hour. In that case the total cost would be 400 + 500 = $900. However, again, this is not relevant because all they will do is pay the penalty for being late and will still get the contribution)

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