The management of Croesus Ltd. is concerned about increasing labour turnover at the company's factory...
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Accounting
The management of Croesus Ltd. is concerned about increasing labour turnover at the company's factory and wants to determine the profit foregone because of labour turnover last year. A cost analyst at Croesus has established the following: 1. Last year's total sales amounted to R8 600000 , and the loss of contribution is approximately 20% of lost sales as a result of labour turnover. 2. The total number of actual hours worked by the direct Labour force was 450000 hours. The actual direct labour hours included 30000 hours attributable to training new recruits, out of which, two-thirds of the hours were unproductive. 3. As a result of the delays by the human resources department in filling vacancies due to labour turnover, 100000 productive hours were lost. The subsequent cost incurred on labour turnover revealed, on analysis, the following: Required: If the lost production because of labour turnover could have been averted at prevailing prices, find the profit foregone last year on account of labour turnover
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