A manager is trying to determine the relevant cost of certain materials and labour that will be needed for a one-off contract.

(a) The market price of material A is £14 per kg. The contract requires 80kg of material A. The company ordin-arily purchases 500kg of material A each month and receives a bulk buying discount of £1 per kg on all its purchases. If this contract is undertaken the company will be able to place an order for 580kg next month and the bulk buying discount will increase to £1.10 per kg on all material A purchased during the month. Material A is perishable and cannot be stored.

(b) A toxic chemical is also required for the contract. The contract requires 50 litres of the chemical, for which the current market price is £12 per litre. The company has 11 litres already in its inventory, which were originally purchased for £9 per litre. The company has no other use for the chemical and if the items already in inventory are not used on this contract the company will have to pay a total of £220 to have the 11 litres of chemical taken away and disposed of safely.

(c) The contract will also require 34kg of material B which is used regularly by the company. The current inventory of 20kg of material B was originally purchased for £2per kg. The current market price of material B is £3.50 per kg.

(d) The company’s 20 full-time employees will need to work for a total of 180 hours on the contract in a single week. The employees are each paid £10 per hour for a guaranteed 40-hour week. During the week in which the contract must be completed, the company already has 665 hours of work scheduled. The employees are willing to work up to 10 hours overtime per week each, at a rate of £15 per hour. Required Determine the relevant cost for this contract of each of the three types of material and of labour.