A company is planning to bid for a one-month contract. It has sufficient spare labour and machine capacity to carry out the contract without affecting other activities. Costs associated with the contract would be as follows: Direct materials Direct labour Variable overheads Depreciation $ 12,440 18,300 6,020 2,000 an addition, it is estimated that a supervisor will need to spend 50% of their time on that contract. The supervisor is paid $3,500 a month. What is the relevant cost of the contract? O $18,460 O $14,190 $12,440 $20,210

A company is planning to bid for a one-month contract. It has sufficient spare labour and machine capacity to carry out the contract without affecting other activities. Costs associated with the contract would be as follows: Direct materials Direct labour Variable overheads Depreciation $ 12,440 18,300 6,020 2,000 an addition, it is estimated that a supervisor will need to spend 50% of their time on that contract. The supervisor is paid $3,500 a month. What is the relevant cost of the contract? O $18,460 O $14,190 $12,440 $20,210

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

A company is planning to bid for a one-month contract. It has sufficient spare labour and machine capacity to carry out the contract without affecting other activities. Costs associated with the
contract would be as follows:
Direct materials
Direct labour
Variable overheads
Depreciation
$
12,440
18,300
6,020
2,000
In addition, it is estimated that a supervisor will need to spend 50% of their time on that contract. The supervisor is paid $3,500 a month.
What is the relevant cost of the contract?
O $18,460
O $14,190
O $12,440
O $20,210

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