oncorde Ltd has been asked to quote a price for an order of 8 units of Product Delta. Making this product will require skilled labour, which is currently in hort supply and is paid £15 an hour. If the order is accepted, all necessary labour will have to be transferred from existing work. As a result, other orders will be lost. It is estimated that for each hour transferred to this contract £45 will be lost (calculated as lost sales revenue £75, less materials £15 and labour -15). The production manager believes that, owing to a learning process, the time taken to make each unit will reduce, from 20 hours to make the first one, y one hour a unit made. (That is 20 hours to make the first one, 19 hours to make the second, 18 hours to make the third one and so on.) What is the total relevant cost of skilled labour for the purposes of the order? The relevant cost for skilled labour will be will be £.
oncorde Ltd has been asked to quote a price for an order of 8 units of Product Delta. Making this product will require skilled labour, which is currently in hort supply and is paid £15 an hour. If the order is accepted, all necessary labour will have to be transferred from existing work. As a result, other orders will be lost. It is estimated that for each hour transferred to this contract £45 will be lost (calculated as lost sales revenue £75, less materials £15 and labour -15). The production manager believes that, owing to a learning process, the time taken to make each unit will reduce, from 20 hours to make the first one, y one hour a unit made. (That is 20 hours to make the first one, 19 hours to make the second, 18 hours to make the third one and so on.) What is the total relevant cost of skilled labour for the purposes of the order? The relevant cost for skilled labour will be will be £.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:oncorde Ltd has been asked to quote a price for an order of 8 units of Product Delta. Making this product will require skilled labour, which is currently in
hort supply and is paid £15 an hour. If the order is accepted, all necessary labour will have to be transferred from existing work. As a result, other orders
will be lost. It is estimated that for each hour transferred to this contract £45 will be lost (calculated as lost sales revenue £75, less materials £15 and labour
15). The production manager believes that, owing to a learning process, the time taken to make each unit will reduce, from 20 hours to make the first one,
by one hour a unit made. (That is 20 hours to make the first one, 19 hours to make the second, 18 hours to make the third one and so on.)
What is the total relevant cost of skilled labour for the purposes of the order?
The relevant cost for skilled labour will be will be £.
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