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SIR I HAVE A DOUBT IN THE ANSWER KEY OF THIS QUESTION TELEPHONE CO (T CO) DEC 2011.
IN IT THE TWO ENGINEERS ARE PAID A MONTHLY SALARY OF $4000….IN THE EXAMINER ANSWER KEY THE POINT NOTE NUMBER 2 STATES” The situation for the other two engineers is slightly different. Their time is currently fully utilised and earning a contribution of $5 per hour each. This is after deducting their hourly cost which, given a salary of $4,000 per month each, is $25 per hour ($4,000/4 × 40).” I DON’T GET WHY THEY USED THE HOURLY COST…. I THOUGHT SINCE IT IS MONTHLY LABOUR SALARY, IT WILL BE FIXED, HOWEVER SINCE THEY ADDED BACK THE LABOUR COST IN CONTRIBUTION
IT MEANS THEY ASSUMED IT TO BE VARIABLE?It says
The installation is expected to take one week to complete and would require three engineers, each of whom is paid a monthly salary of $4,000. 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 contribution of $5 per engineer hour.
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. Since there is no other work scheduled for their engineers in one week’s time, it will not be a problem for them to complete Contract X at this point.The contract says monthly salary, annually renewable ct etc
You cannot assume it is a fixed labour cost!ok so since we cannot assume fixed cost that’s why they have considered it variable and hence the note 2.
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