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all of a company’s skilled labour ,which is paid $8 per hour ,is fully employed manufacturing a product which the following data refer
selling price $ 60
less: variable cost
skilled labour $ 20
others $15
contribution $ 25the company is evaluating a contract which requires 90 skilled labour hours to complete .no other supplies of skilled labour are available.
what is the total relevant skilled labour cost of the contractA $720
B $900
C $1620 the correct answer is C
D $2160Questions like this were removed from the Paper F2 syllabus many years ago, and are now only asked in Paper F5 (and there are lectures on it in the F5 syllabus).
I will give you the answer, but again it is not for F2.
The hours per unit are 20/8 = 2.5 hours.
The lost contribution per hour is therefore 25/2.5 = $10
Therefore the relevant cost of 90 hours = 90 x (8 + 10) = $1620
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