Relevent costing

Let me give you a simple example. Suppose the units that they are currently making have a selling price of $20, labour of $5, and other variable cost (eg materials) of $3. So the contribution is $12. Suppose the labour is taken away to use on another product. They will lose the revenue of $20. They will save the other variable costs of $3 (but they will obviously still be paying the labour). So the net loss (the relevant cost) is $20 - $3 = $17. This will always be the same as the contribution plus the labour ($12 + $5 = $17).