Preparation of project statements for different demand levels and calculations of expected profit Seeprint Limited is negotiating an initial one year contract with an important customer for the supply of a specialized printed colour catalogue at a fixed contract price of 16 per catalogue. Seeprint's normal capacity for producing such catalogues is 50 000 per annum. Last year Seeprint Limited earned 11000 profit per month from a number of small accounts requiring specialized colour catalogues. If the contract under negotiation is not undertaken, then a similar profit might be obtained from these customers next year, but, if it is undertaken, there will be no profit from such customers. The estimated costs of producing colour cata- logues of a specialized nature are given below. The costs below are considered certain with the exception of the direct materials price.

Estimated fixed costs per annum:

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Cost data: () Variable costs per catalogue Direct materials Direct wages Direct expenses 4.50 3.00 1.30 Output levels (capacity utilization) Semi-variable costs 80% 100% 120% () () () Indirect materials 46 800 47000 74 400 Indirect wages 51 200 55000 72000 Indirect expenses 6000 8000 9 600