Basic. A company has just secured a new contract which requires 500 hours of labour.

There are 400 hours of spare labour capacity. The remaining hours could be worked as overtime at time-and-a-half or labour could be diverted from the production of product X. Product X currently earns a contribution of £4 in two labour hours and direct labour is currently paid at a rate of £12 per normal hour.

What is the relevant cost of labour for the contract?

(a) £200

(b) £1200

(c) £1400:

(d) £1800 ACCA - Financial Information for Management