CIMA BA2 · Chapter 11 · Question 5 of 12
A special order needs 200 hours of skilled labour, paid $15 per hour. Skilled workers are fully employed making Product Z, which earns a contribution of $12 per labour hour AFTER charging labour cost. If the order is accepted, Product Z production will be reduced. What is the relevant cost of the skilled labour for the order?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $5,400
Explanation
Labour must be diverted from Product Z. The relevant cost per hour is the wage still paid ($15) plus the contribution forgone ($12) = $27. Relevant cost = 200 x $27 = $5,400.
More Relevant costs and limiting factor decisions MCQs
- Q7Machine hours are in short supply. Details of three products are: Product A: contribution $30 per unit, 2 machine hours per unit Product…
- Q8Machine hours are in short supply, with only 10,000 machine hours available. Details of three products are: Product A: contribution $30…
- Q9A company needs 5,000 units of a component. Making it in-house costs $14 per unit in variable costs and would also require a supervisor…
- Q10A product line earns a contribution of $40,000 a year and is charged $55,000 of apportioned fixed overheads, of which $12,000 would be…
- Q11Which of the following is a COMMITTED cost, and therefore not relevant to a new decision?