Advanced: Preparation of project statements for different demand levels and calculations of expected profit. Seeprint Proprietary Limited is negotiating an initial one-year contract with an important customer for the supply of a specialised printed colour catalogue at a fixed contract price of R160 per catalogue. Seeprint's normal capacity for producing such catalogues is 50,000 per annum. Last year Seeprint Proprietary Limited earned R110,000 profit per month from a number of small accounts requiring specialised colour catalogues. If the contract under negotiation is not undertaken, then a similar profit might be obtained from these customers ASSESSMEMT MATERIAL. 375 next yeat, but, if it is undertaken, there will be no profit from such customers: The estimated costs of producing colour catalogues of a specialised nature are given below. The costs below are considered certain with the exception of the direct materials price. Cost data: Estimated fixed costs per annum: Required: (a) Tabulate the costs and profits per unit and in total and the annual profits, assuming that the contract orders in the year are: (i) 40,000 , (ii) 50,000 and (iii) 60,000 catalogues, at a direct material cost of R45.00 per catalogue. Comment on the tabulation you have prepared. (10 marks) (b) Calculate the expected profit for the year if it is assumed that the probability of the total order is: 0.4 for 40,000 catalogues 0.5 for 50,000 catalogues 0.1 for 60,000 catalogues and that the probability of direct material cost is: 0.5 at R45.00 per cataiogue 0.3 at R50.00 per catalogue 0.2 at A55.00 per catalogue. (6 marks) (c) Discuss the implications for Seeprint Proprietary Limited of the acceptance or rejection of the contract with the important customer. (6 marks) Acopted from ACCA Levei 2 Management Acoounting