Question 1aA contract is under consideration that requires 600 labour hours to complete. There are350 hours to spare capacity.The remaining hours for the contract can be found either by weekend overtime workingpaid at double the normal rate of pay or by diverting labour from the manufacturing theproduct QZ. If the contract is undertaken and labour is diverted, then sales of productQZ will be lost. Product QZ takes three labour hours per unit to manufacture and makesa contribution of Rs.12 per unit. The normal rate of pay of labour is Rs.9 per hour.Required:What is the total relevant cost of labour for the project?Question 1bA company is evaluating a project that required the following types of material.MATERIAL IN STOCKNEEDEDPURCHASE CURRENTFORPURCHASECONTRACTAABCDEс1001,100F1,0001,00010050,0001,000100200PRICE OFSTOCK5,0003,000(RS.)1.102.002.000.251.00Material B and E are used regularly in the company. Material A could be sold to a localsculptor, if not used for the contract. Material A and E can be used for other purpose,such as property maintenance. Company has no use for material D and F, the stocks ofwhich are obsolete.4.000.180.90PRICE(RS.)3.000.906.003.000.202.00Required:Calculate the relevant cost of each material.CURRENTRESALABLEPRICE (RS.)2.001.00

Lets understand the basics. Relevant cost is a cost which are relevant for the decision making…

Answered: A contract is under consideration that…

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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