The management of Bina and Rina Ltd. is worried about its increasing labour turnover in the factory and before analysing the causes and taking remedial steps it wants to have an idea of the profit foregone as a result of labour turnover in the last year.

Last year sales amounted to Rs. 83,03,300 and P/V ratio was 20 per cent. The total number of actual hours worked by the direct labour force were 4.45 lakhs. As a result of the delays by the personnel department in filling vacancies due to labour turnover, 1,00,000 potentially productive hours were lost. The actual direct labour hours included 30,000 hours attributable to training new recruits, out of which half of the hours were unproductive.

The cost incurred consequent on labour turnover revealed, on analysis, the following:

Assuming that the potential production lost as a consequence of labour turnover could have been sold at prevailing prices, find the profit fore gone last year on account of labour turnover.

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Settlement cost due to leaving Recruitment costs Selection costs Training costs Rs. 43,820 Rs. 26,740 Rs. 12,750 Rs. 30,490