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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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