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relevent cost: cost r rev
contribution loss(118500)
the examiner calculate to add mat cost plus contribution which = 150(5000)5%+270(6000)5%.mat cost 70 plus contribution 80=150 and 100+170=270 sir what is the logic behind them.Usually, if we lose sales of a product then we lose the contribution from those units.
(So normally, if we lose sales of DW then we lose contribution of $80 for each unit lost).However, in this question there is a problem with the materials cost, and so (as the examiner states in his answer) he deals with materials separately.
So if we ignore materials for the moment, then if we lose sales of DW then we lose the revenue ($200 per unit) and we save the labour ($50 per unit), so a net $150 per unit.We will save on materials as well, but again because there is a complication the examiner deals with the materials separately in his answer.
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