Information Regarding Direct Labour Relevant Costing
Direct labour:
700 hrs. of skilled labour at Rs.3.50 per hour 2,450
1,500 hrs. of unskilled labour at Rs.2 per hour 3,000
Direct Labour: The work force is paid on a time basis. The company has adopted no redundancy policies, which mean that skilled workers are frequently moved to jobs, which do not make proper use of their skills. The wages included in the cost estimate are for the mix of labour, which the job ideally requires. It seems likely, if the job is obtained, that most of the 2,200 hours of direct labour will be performed by skilled staff receiving Rs. 3.50 per hour.
What is the Relevant Cost? The answer given by the Institute is Rs. 12,500/-? How has it been calculated???
Please Explain,
Thanks
CAclubindia
