4. Silva Silva is a company which makes wooden toys by hand. It has agreed to a contract to supply toy trains and, as the company is very busy with other work, it has to decide whether to continue with the contract. The contract is worth 2,000 and, to make the toy trains, the following materials are needed: Paint already in stock, purchased for 300. This type of paint could be bought at a current price of 350 and could be used for other toys. Wood purchased for 400 but already cut in small pieces. It could be sold to other manufacturers for 150. Magnets these were purchased for 225 and made especially for this contract. They would have no resale value or other use. Labour as the company is operating at capacity, they would need to recruit temporary labour, costing 12 per hour for an estimated 25 hours. Tools (chisels, sanding machine, etc) these have already been bought for 450. Management charge every contract is charged with 10% to cover management costs.

REQUIRED: Advise Silva on whether or not they should complete the contract.