ACCA PM Syllabus C. Decision-making Techniques - Relevant cost of Labour - Notes
The key question here is: Is there spare capacity?
Different Scenarios...
Spare capacity
So, additional work can be undertaken at no extra cost :)
Relevant cost of labour is a big, fat 0
Full capacity - so hire more workers
Relevant cost is current pay rates
Full capacity - takes workers from another project
So this project can't be finished :( - so we lose its contribution but we still have to pay the workers on our project
Relevant cost is Lost contribution + labour cost
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Relevant cost of Materials
Syllabus C. Decision-making Techniques
C1. Relevant Cost Analysis
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CVP Analysis
Syllabus C. Decision-making Techniques
C2. Cost Volume Profit Analysis