BSE Veterinary Services is a specialist laboratory carrying out tests on cattle to ascertain whether the cattle have any infection. At present, the laboratory carries out 12,000 tests each period but, because of current difficulties with the beef Accounting in a Nutshell 288 herd, demand is expected to increase to 18,000 tests a period, which would require an additional shift to be worked.

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The current cost of carrying out a full test is: Materials Technicians' wages Variable overhead Fixed overhead Working the additional shift would: per test 115 30 12 50 (i) Require a shift premium of 50 per cent to be paid to the technicians on the additional shift. (ii) Enable a quantity discount of 20 per cent to be obtained for all materials if an order was placed to cover 18,000 tests. (iii) Increase fixed costs by 700,000 per period. The current fee per test is 300. Required (a) Prepare a profit statement for the current 12,000 test capacity. (b) Prepare a profit statement if the additional shift was worked and 18,000 tests were carried out. (c) Comment on three other factors which should be considered before any decision is taken.