Answer Happy

The Managing Director of All Found Limited is very much perturbed to see that labour turnover is increasing every year. Before taking an appropriate action, he desires to know the profit forgone on account of labour turnover. You are required to calculate the profit forgone on account of labour turnover from the following: Income statement for the current year ended March, 31 Sales Variable costs: $ 20,00,000 Material $5,00,000 Direct labour 4,00,000 Variable overheads 4,00 000 13,00,000 Contribution 7,00,000 Less fixed overheads 2,00,000 Profit before taxes 5,00,000 The direct labour-hours worked in the concern during the period were 20,300, of which 500 hours pertained to the new workers on training. Only 40 per cent of the trainees time was productive. As replacement for the worker left was delayed for some time, 600 productive hours were lost. The direct costs incurred by the company as a consequence of labour separation and replacement were as follows. Separation costs $20,000 Selection costs 30,000 Training costs 50,000