Intermediate A company is considering accepting a one-year contract which will require four skilled employ¬ ees. The four skilled employees could be recruited on a one-year contract at a cost of £40 000, per employee. The employees would be supervised by an existing manager who earns £60000 per annum. It is expected that supervision of the contract would take 10% of the manager’s time.

Instead of recruiting new employees, the company could retrain some existing employees who currently earn £30000 per year. The training would cost £15 000 in total. If these employees were used they would need to be replaced at a total cost of £100000.

The relevant labour cost of the contract is:

A £100000 B £115 000 C £135 000 D £141000 E £166 000.