- This topic has 2 replies, 2 voices, and was last updated 4 years ago by
.
Viewing 3 posts - 1 through 3 (of 3 total)
- Posts
Sir if labor is available but doing other job so what is relevant cost in that please explain?
It is the lost contribution per hour lost if the current production is stopped plus the hourly labour rate.
Say existing production per hour makes a unit that sells for 100, material =50 and labour = 30. Contribution/hour is 20.
If labour ‘sacked’ for an hour contribution of 20 is lost (this figure assumes 30 labour costs saved). However, to undertake the new project, that labour needs to be employed again at a cost of 30. Therefore, the relevant cost is 20 + 30 =50
Viewing 3 posts - 1 through 3 (of 3 total)
- The topic ‘Relevant Costing’ is closed to new replies.