Question

The management of Sunshine Ltd. wants to have an idea of the profit lost/foregone as a result of labour turnover last year. Last year sales accounted to 66,00,000 and the PN Ratio was 20%. The total number of actual hours worked by the direct labour force was 3.45 lakhs. As a result of the delays by the Personnel Department in filling vacancies due to labour turnover, 75,000 potentially productive hours were lost. The actual direct labour hours included 30,000 hours attributable to training new recruits, out of which half of the hours were unproductive. The costs incurred consequent on labour turnover revealed on analysis the following: datorn Design Settlement cost due to leaving 27,420 Recruitment costs 18,725 Selection costs 12,750 Training costs 16,105 Assuming that the potential production lost due to labour turnover could have been sold at prevailing prices, ascertain the profit foregone/lost last year on account of labour turnover.

Answer 1

The detailed answer is attached in below picture.

Summary of answer

1. Potential production lost in Rs. - Rs. 3,60,000

2. Total Cost due to labour turnover - Rs 4,35,000

Thanks

Sunshina Ltd Calculahion ef contaibatthran& contaibution bour Per sales 660000D Last year P/u Ratior 12 20000 Contribubion (Sal xPlu Ratio) C66000s0 X20) 34s000 bours Labour houss ceostad Less Uapanduutive toaining houss I5000) hous (30000 houss x50%) 330000 houss Net woaking hos Labaur Rat por hour s1320000 330000 hos Contaibution net cwoskin houas Contaybuton xBe Sat per hour 4

Date Page Calculation a contaibution lost DDelay in tilling Vacany 5000h0urs ISooo hous Uppsupduntiue tsainicg touss (30060 houas x so) Total paodobive houa Cost9o000hous (X) Contaibution sat hous 360000 Potential panduubion lost C90000 hows y ) Calculation turnoves total cnst due to labous 36000O 42O Potential produution los Settlerrontcost due to leaving Racritmant cost 4) Selection cos Tairing 2,350 ३ 16,105 cosh 435000 Total cost