1.Berta Ltd makes specialist machinery to customers' specifications. Recently, just as Berta Ltd completed a particular machine for a customer, it received information that the customer had gone bankrupt with no possibility of any payment to Berta Ltd being seen as likely.

The total contract price was 55,000. The contract specified that payment must be made in stages, as the machine's manufacture progressed. Berta Ltd had received 30,000 in progress payments for the machine. It is estimated that the machine could be sold, as it stands, for 40,000.Another potential customer has been identified for the machine, but this would require alterations to it. Details of the alterations are as follows:

Material A. The required quantity is held in inventories. This cost 3,000 when it was bought. It would cost 3,200 to replace it. The material is hazardous and would cost the business 500 to scrap it. Berta Ltd uses it constantly.

Material B. By coincidence the appropriate quantity of this material was ordered recently for another contract that was subsequently abandoned because the material was not delivered in time. Berta Ltd does not normally use this material and its scrap value is 2,000. The original cost price was agreed at 5,000. Though the contract to buy this material is binding, the supplier will accept 4,000 to compensate for the late delivery. The current market buying price is now 3,500.

Material C. 25 units of this material will be required. This is in general use in the company. An order for 30 units is shortly to be placed for another job. The price for this material is 65 a unit, but the supplier allows a bulk discount of 5 a unit, for the entire order, for orders of 50 units and above.

Labour. 50 hours of labour will be required for the alterations. Labour is a fixed cost to Berta Ltd, because members of staff are paid in full the normal 13 an hour whether there is work for them to do or not. 20 hours, of the required 50 hours, can be provided by members of staff who currently have no work to do. Only taking staff off other work can provide the remaining 30 hours. This other work is charged out to customers at 25 an hour.

Required:

Calculate the minimum price that Berta Ltd could charge the customer for the altered machine, such that the shareholders would be no worse off as a result. In your answer, you must make detailed notes showing how each cost has been arrived at and clearly explain why each of the costs above has been included or excluded from the calculation.