LW is currently deciding whether to undertake a new contract. 15 hours of labour will be required for contract. LW currently produces product L, the standard cost details of which are shown below.

STANDARD COST CARD - Product L

Rs/Unit

Direct materials (10 kg @ Rs 2) 20

50

Selling price 72

Contribution 22

1. What is the relevant cost of labour if the labour must be hired from outside the

organisation?

(b) What is the relevant cost of labour if LW expects to have 5 hours spare capacity?

(c) What is the relevant cost of labour if labour is in short supply?