Activity 1

A mining operation uses skilled labour costing $\$ 4$ per hour, which generates a contribution, after deducting these labour costs, of $\$ 3$ per hour. A new project is now being considered that requires 5,000 hours of skilled labour. There is a shortage of the required labour. Any used on the new project must be transferred from normal working. Calculate the relevant cost of using the skilled labour on the project. Calculate the contribution cash flow that is lost if the labour is transferred from normal working.

Activity 2

Suppose the facts about labour are as above, but there is a surplus of skilled labour already employed (and paid) by the business which is sufficient to cope with the new project. The presently idle men are being paid full wages. Calculate the contribution cash flow that is lost if the idle labour is transferred to the project.