The profitability position of M/s Pioneer Industries Ltd for a year is as follows:
|
Rs. (in Lakhs) |
||
|
Annual turnover |
200 |
|
|
Variable costs: |
||
|
Direct material |
60 |
|
|
Direct labour |
40 |
|
|
Variable overheads |
50 |
150 |
|
Marginal contribution |
50 |
|
|
Fixed overheads |
10 |
|
|
Profit for the year |
40 |
The profit for the year did not match with company’s expectation and the works management attributed it to labour turnover.
Analysis of data revealed the following:
|
Direct labour hours |
|
|
Permanent workmen worked during the year: |
9,60,000 |
|
Apprentice workmen worked: |
80,000 |
|
Total direct labour hours: |
10,40,000 |
The effectiveness of direct labour hours put in by apprentice workmen was 50% and the delay in replacing against the separations resulted in a loss of 20,000 direct labour hours. Calculate the loss or profit on account of loss of production from labour turnover.