In Chapter Nine, Illustration 7.
I am unable to understand why labor cost is deducted? I got my answer till 2000 but have not subtracted labor cost of 30000.
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5y ago#1It is because the contribution foregone figure is based on losing sales but also not incurring material, labour or variable overheads ( contribution = sales less variable costs). However, here we do not lose labour, we move employees across and still have to pay them. The labour cost is therefore a correction to the effect of the contribution foregone.
Yeah yeah correct. Thanks.
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