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the contract requires 800 hours of skilled labour. Skilled labor is paid $9.50 per hour. There is a shortage of skilled labor and all the available labor is fully employed in the company in the manufacture of product P.
Selling price of P is $100 per init. Each unit needs 4 hours of skilled labor at $9.50 per. Other variable costs are 22. Contribution is $40. ($10 per unit.)
So tell me. Why in the Answer there is no mention of saving those Variable costs +Contribution like you told us. There is only saving of labour there.
so 800 (9.50+10)=15600.
Thank you!2) The installation of telephones is expected to take one week to complete and would require 3 engineers, each of whom is paid a monthly salary of $4000. The engineers have just had their annually renewable contract renewed with T Co. One of the three engineers has spare capacity to complete the work, but the other two would have to be moved from contract X in order to complete this one.
Contract X generates a Contrbution of $200 per engineer per week. There are no other engineers available to continue with contract X if these two engineers are taken off the job. It would mean that T Co would miss its contractual completion deadline on Contract X by one week. As a result, T Co would have to pay a one-off penalty of $500.
Question: 1.)Why Engineers costs = only 500. We not including Lost contribution because it is already lost by missing the Contract X and covered by penalty?? Ok.
2)But what about the salaries of 2 engineers that do not have spare capacity. Wouldnt we include 1 week of each 2 engineers for this contract. Cause they do not have spare capacities.
Thank you!
I did not say contribution plus variable costs at all.
It is the contribution plus the labour which is exactly they have done in the answer you have quoted!!!
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