CAF-5 · Chapter 14 · Question 9 of 10
A technical advisor is paid Rs. 400 per hour. He is currently working at full capacity. If the company accepts a new contract, he will need to dedicate 8 hours to it. Since he cannot be diverted from his regular work, he will have to work overtime to complete the new contract, for which he is paid a 50% premium above his usual rate. What is the total relevant cost of his time for the new contract?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 4,800
Explanation
The advisor's normal rate is Rs. 400. With a 50% premium, the overtime rate is Rs. 600 per hour (400 + 200). Since 8 hours are required, the incremental cash outflow is 8 hours × Rs. 600 = Rs. 4,800.
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