Question
A) MM Consultancy Service has been asked to quote a price for a contract that will take two weeks to complete. Information relating to staffing
A) MM Consultancy Service has been asked to quote a price for a contract that will take two weeks to complete. Information relating to staffing for the contract is as follows:
Grade of staff | Hours required | Basic rate/hour |
Manager | 80 | $55 |
Senior Analyst | 50 | $40 |
Junior Analyst | 30 | $25 |
A shortage of managers means that the necessary staff to undertake the contract would have to be moved from other work that is currently generating a revenue of 140 per hour.
Senior analysts are currently being paid their normal salaries to undertake work suitable for junior analysts. If the relevant members of staff are moved to work on the contract, junior analysts will have to be employed for the period to replace them, however junior analysts will only work if overtime of 40% is paid.
The junior analysts actually needed to work on the contract will be specifically employed for the period of the contract.
What is the total relevant cost of wages for the contract? (4 marks)
B) Mason Limited is an engineering company that owns a non-working machine, which it wants to sell. The company originally paid 9,500 to buy the machine and without the part, it could be sold for an estimated 8,500. The machine needs a replacement part before it can be sold. It is possible to buy the part for 600.This would take 8 hours to fit by one of the company's engineers who is paid 20 an hour and who are currently busy and generate sales of 60 per hour from customers.
Calculate the total relevant cost (minimum price) of this project after fitting a replacement part? (4 marks)
C) Yealm (Boatbuilders) Ltd has been asked to refit a boat for a customer.
Skilled labour costing 11 per hour will be required for the refit. The workers will have to be taken off the production of canoes for resale for a total of 180 hours. The canoes are sold for 140 each and take 15 hours of skilled labour. The material cost of each canoe is 40.
What is the relevant cost when assessing the viability of the refit contract? (4 marks)
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