Relevant Costing

John,

Thank you for your reply on the last query – I totally get your explanation – I cannot thank you enough.

I’m embarrassed, but I have another question, if you have time.

In the June 09 exam, Question 4, on relevant costing.

The staff costs are calculated by multiplying $30 ($20 x 1.5) by the staff hours resulting as a direct consequence of the decision to open on a Sunday, multiplied by the 50 Sundays of the year.

However, four hours, per staff member is then saved (replacement staff are not scheduled in) to offset a part of this incremental expense. So I took the net of the $45,000 Sunday staffing cost and the $20,000 midweek staff saving resulting from five staff, taking off four hours, at a rate of $20, for fifty weeks of the year.

Why don’t we net the expense off against the saving here?

Further, the scenario stated: “…the heating will come on two hours before the store opens…” and the fifth paragraph said the store was open for six hours and so I thought this meant there was an additional two hours heating, prior to opening and so I multiplied the hourly heat and light expense of $75 (combined) by 6 hours of the day, for the 25 winter weeks and then included 2 hours of heat at $45 multiplied by the 8 weeks and summed the two. This was wrong. Why isn’t the additional two hours of heat, prior to store opening a relevant cost?

P.S.
I don’t know if I’m using the ‘ask your tutor’ to excess. here’s a couple of days left till my exam, would you mind if I posted three or four more questions, if necessary?