A contract needs 500 labour hours. The workforce is fully employed at $20 an hour, earning $12 an hour contribution on other work. What is the relevant labour cost?

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Question

A contract needs 500 labour hours. The workforce is fully employed at $20 an hour, earning $12 an hour contribution on other work. What is the relevant labour cost?

Accepted Answer

$16,000 — Award 1 mark. Working: wages 500 × $20 = $10,000 plus contribution forgone 500 × $12 = $6,000. The nil answer would be right only if there were spare capacity.

Answer

$10,000

Answer

Nil, because the workers are paid anyway

Answer

$6,000

Answer

$16,000

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