Question
Clever manager is short of labor for a new one-off project needing 600 hours of labor and has choices as to where to source this.
Clever manager is short of labor for a new one-off project needing 600 hours of labor and has choices as to where to source this. He could hire new people temporarily from an agency at a cost of $9 per hour.
Alternatively, he could recruit new temporary staff at a fixed cost of advertising of $1,200 but then only pay $6 per hour for the time.
He could also redirect some staff from existing work who are currently paid $7 per hour and who make sandals that generate a contribution of $3 per hour after all variable costs. Sandals are a good selling product and Clever will lose the production and the related sales whilst staff is working on the new one-off project.
What is the relevant cash flow?
A $1,800
B $3,600
C $4,200
D $4,800
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