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I didn’t understand the concept of the ways it’s calculated 100*(5+8/2)=900 plz explain why the soon is like that…
According to me it has to be 100/2*8=400The questions in the mock exam are selected at random from a large bank of questions. So what you got as question number 5 will not be the same as the question 5 that I will get.
(This is what happens in the real exam – everyone gets different questions 🙂 )Please type the first line of the question and then I will be able to find it and explain.
A contract requires 100 hrs of skilled labour labour is paid 5$per hour .
Labour is currently fully occupied making another product which is generating a contribution of 8$per unit.each unit of the other product requires 2 hrs of skilled labour .what is the relevant cost for labourThe relevant cost per hour is the labour cost ($5) plus the lost contribution ($8/2).
This is always the case if labour is fully occupied (and I do explain it in my lectures).
To explain again:
Suppose the current product takes 1 hour to make, has a selling price of $10 per unit, material cost of $3 per unit, and labour cost of $2 per unit (so a contribution of $5 per unit).
If that 1 hour is taken for another job, then we lose the revenue of $10 and save the materials of $3. (The labour is still being paid). So the net cost = 10 – 3 = $7. This is always the same as the labour cost per hour ($2) plus the lost contribution ($5).
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