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Practice Questions (F9 Chapter 8 Questions)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Practice Questions (F9 Chapter 8 Questions)

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.
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  • December 16, 2015 at 1:39 pm #291991
    Amit
    Member
    • Topics: 41
    • Replies: 32
    • ☆☆

    A new project is being considered that will require of 500 hours of skilled labour. The current work force is already fully employed and would have to be taken off work that is currently earning a contribution of $12 per hour, The current workers are paid at a rate of $10 per hour.
    What is relevant cost of labour?

    Opportunity cost is $12 X 500 = $6000
    but $10 is the cost which we must pay even if we do not do the project. so i think $10 per hour is not relevant cost of labour. I am confused, pls explain sir.

    December 16, 2015 at 4:55 pm #292017
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    You need to watch the free lecture on relevant costing because this is a standard question and I do explain the logic during the lecture. I can’t type out the whole lecture here 🙂

    If labour is being taken from another job, then the relevant cost per hour is the cost of the labour per hour plus the lost contribution per hour.

    (Our free lectures are a complete course for Paper F5 and I do suggest that you download our free Study Guide which has links to all of the lectures.)

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