Winterburn Ltd has been offered $21,000 by a customer to make some equipment. The extra...
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Accounting
Winterburn Ltd has been offered $21,000 by a customer to make some equipment. The extra cost of the machine would be $3,000 for materials. It would also require 4,000 labour hours. Labour wages is $4 per hour, variable overheads is $2 per hour and fixed overheads is absorbed at the rate of $4 per hour. Labour is in short supply, and if the job is accepted, workers with 1000hrs would have to be diverted from other work which is expected to earn a contribution of $5 per hour.
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