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When we decide to pay overtime on labour resource that is fully utilised (ie no idle capacity), in determining relevant costs why do we recognise both BASE RATE and O/T PREMIUM as relevant. The O/T makes sense to me but the base seems to me a committed cost and hence not relevant. Where do I miss the concept?
Yamikani.
It very much depends on the question. In some cases it will only be the overtime.
For me to say more you really need to write the example that is puzzling you and then I will be able to explain why.
I was just following through some introductory notes on Decision Making and Relevant costs and have not yet come to tackle real questions. Let me have a look at some questions for now and will come back to you.
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