Question A4 Saylor Ltd is considering a new contract that will require four additional skilled employees. Each of the employees could be recruited on a one year contract at £50,000 per employee. The staff will require to be managed by an existing manager who currently earns £100,000 per annum. This contract will probably take around 20% of the manager's time to supervise. As an alternative, the company could retrain existing staff who currently earn £40,000 per annum. The retraining costs will be £20,000 and if these staff were used they would need to be replaced at a cost of £125,000. Required: Identify the relevant labour costs of the contract.

Question A4 Saylor Ltd is considering a new contract that will require four additional skilled employees. Each of the employees could be recruited on a one year contract at £50,000 per employee. The staff will require to be managed by an existing manager who currently earns £100,000 per annum. This contract will probably take around 20% of the manager's time to supervise. As an alternative, the company could retrain existing staff who currently earn £40,000 per annum. The retraining costs will be £20,000 and if these staff were used they would need to be replaced at a cost of £125,000. Required: Identify the relevant labour costs of the contract.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Excaster University is considering launching a new 12 month taught Masters programme in Data Analytics. In order to offer the programme the University will incur the following fixed costs: a) One full time administrator at an annual cost of £40,000 b) Advertising and promotional costs of £25,000 per year c) Subscriptions to data providers £50,000 per year d) Licenses for analytical software £35,000 per year e) In addition the course will incur an overhead charge for use of shared resources of £45,000 per year. Teaching on the course will be delivered at an estimated cost of £500,000 per year. The variable costs associated with delivering an excellent student experience are estimated at £2000 per student. Bathchester University (about 60 miles away) offers a competitive course priced at £13,000 which attracts 60 students. Plymhampton University (about 30 miles away) also offers a competitive course and charges £9,000 and has recruited 40 students for the most recent intake. Excaster are…
Harrison Contracting considered a maintenance contract for Canadian National Railway (CN). The CN contract is for 8 years, and brings in revenue of $28,000 per year, but the cost of equipment needed and annual expenses result in an NPV of -$12,368 at your firm's MARR of 12%. What additional annual revenue would CN's contract need to bring in to make it worthwhile for your firm to undertake the CN contract?
Accept or Reject a Special OfferA company produces 25,000 units at 75% of its total capacity. Its fixed factory overhead is $50,000, variable costs are $7.50 per unit, and it sells each unit for $12. A foreign customer wishes to purchase 5,000 units at a one-time price of $8 per unit. Should the company agree to the terms or reject the offer? How much additional contribution margin, if any, would the special order generate?
BACKGROUNDThe company ABC, L. C. manufactures someproducts with an average sales price of € 25/unit,with fixed annual costs of € 110,000. The averageunit variable costs are € 5. The company Derabel, S.A. is considering buying a new machine for its production process. This project means an initial cost of € 200,000 and the machine is estimated to have a useful life of 5 years. The maximum productive capacity of the machine is 200,000 units per year. However, the first year it is expected that the activity will be 70% of the maximum installed capacity, reaching 100% from the second year. During the first year, the unit sales price will be € 2.50, the unit variable cost € 1.50 and the fixed annual cost € 60,000, resulting in cumulative yearly increases of 4% in the price of the product sale, 3% on variable costs and 2% on fixed costs. Also, it is assumed that: The company uses a linear depreciation system, and the residual value of the machine is € 25,000. Besides, the…
Brecht Ltd produces a standard product which is sold for £85 each. The business incurred variable costs of £550,000 last year and total costs were £850,000. The business sold 11,000 units during the year and was operating at full capacity. The business intends to expand its output. This will involve building a factory extension, which will increase annual fixed costs by £120,000 per year. 1. Calculate the number of products that need to be sold in order for the business to break even, after the new factory extension has been built. 2. Calculate the profit (loss) that would be generated if the business sold 10,000 units (i) before the factory extension is built. (ii) after the factory extension is built.
Problem
Management Accounting. Solve this
Garner Strategy Institute (GSI) presents executive level training seminars nationally. Eastern University (EU) has approached GSI to present 40 one-week seminars during 2013. This activity level represents the maximum number of seminars that GSI is capable of presenting annually. GSI staff would present the week-long seminars in various cities throughout the United States and Canada. Terry Garner, GST's president, is evaluating three financial options for the revenues from Eastern: accept a flat fee for each seminar, receive a percentage of Eastern's profit before tax from the seminars, and form a joint venture to share costs and profits. Estimated costs for the 2013 seminar follow: Fixed costs for the year: Salaries and benefits Facilities Travel and hotel Other Total fixed costs: Variable costs per participant Supplies and materials Marketing Other site costs Garner Strategy Institute Eastern University $200,000 N/A 48,000 N/A 0 $210,000 70,000 N/A $318,000 $210,000 0 $47 0 18 35…
Yogesh
need help please
Fry Ltd are developing a new type of umbrella for cyclists. Market research has indicated that customers would be willing to pay £80 for the product. The company usually expect a profit margin of 12% on products. Fixed costs for enhancements to production machinery are expected to be £250,000 per year. The company currently has orders for 8000 units this year. Materials are expected to cost £25 per unit. Each product requires 45 minutes of specialist labour to manufacture. The personnel department are having difficulty in recruiting these specialist staff and report that the expected rate of pay is £20- £25 per hour. a) Calculate the maximum hourly rate that Fry Ltd could pay to achieve the Target Cost.
Goldstone The management of goldstone are considering the purchase of new equipment which would allow the company to expand its operations for three years. Details are as follows: The equipment will cost £1.2 million and it is anticipated it will be sold for £620,000 three years later. The sales volume generated by the new machine would be at a steady 88,000 units per year; the selling price will be kept at £40 and variable costs are estimated at £25 per unit for all three years. Additional premises will be rented at a cost of £280,000 pa, payable on the first day of each year. Working capital equal to 10% of sales revenue will need to be in place at the start of each year. The equipment will qualify for capital allowances, which are at a rate of 18% on a reducing balance basis, with a balancing allowance or charge on disposal. The company pays tax at 20%, has a cost of capital of 10% and always works to the nearest £1,000. By calculating the NPV of the project, advise the…