Answer all parts. Rolls ple. is involved in the design and manufacture of light outboard boat engines. The company has just received an enquiry about the possibility of supplying 30 engines to a marine company Royce Lid. The finance director of Royce l. Id. has informed Rolls ple. that they have just received quotes from other manufacturess of light outhoard boat engines and that the most reasonable quote was \\( 145,000 \\) per engine. The management accountant of Rolls plc. has provided you with the following details relating to the costs involved in the construction of the light outboard boat engines: 1. Each engine will require 12 litres of oil. The company has 300 litres of oil in inventory and if the oil is not used it will be disposed of immecliately. The costs of disposal is \\( 1,850 \\). The original purchase price of the oil in inventory was \\( 340 \\) per litre. The replacement cost of a litre of oil is \\( 350 \\). 2. Each engine will also require 15 sheets of alloy stecl. The purchase price of a sheet of steel is \\( 3,800 \\) for all purchases up to and including 300 sheets. The supplier has agreed to offer a discount of \10 on the purchase price on all purchases over 300 sheets. 3. Additionally, each engine will require 1 slab of cast iron and this type of iron is used regularly by Rolls plc. The company holds 22 of these slabs in the warehouse at present. These slabs of cast iron cost \\( 3,150 \\) each one month ago and because cast iron is in limited supply the replacement cost is now \\( 3,415 \\) per slab. 4. The construction of the engines will require a combination of skilled and unskilled labour. Each engine will require 35 skilled labour hours and 10 unskilled labour hours. The skilled labourers are paid \\( 180 \\) per hour and the unskilled labourers are paid \55 of the skilled hourly rate. If this contract does not go ahead there will be 300 skilled idle hours and the company is reluctant to make redundancies due to continued loyalty towards its staff. The unskilled labour will have to be hired in for the contract. 5. The project will require a project manager to oversee the work. Rolls plc. currently employs a manager with the necessary experience who will be transferred to the proposed project should it go ahead. This manager currently earns \\( 78,000 \\) per annum. Due to the size of this project Rolls plc. has agreed to pay him an additional \5 of his current salary. The project manager will then be replaced by a less experienced manager who will be paid an annual salary of \\( 65,000 \\). 6. Variable overheads are absorbed at a rate of \\( 102 \\) per skilled labour hour. 7. Fixed overheads will increase from their current level of \\( 1,360,000 \\) to \\( 2,175,000 \\) if the project to produce the engines is undertaken. 8. In order to assess the practicalities of taking on this project Rolls plc. employed a company to research the availability of materials and experienced labour. This research cost \\( 11,000 \\) and \\( 4,000 \\) is still outstanding. If Rolls plc takes on the project future research into safety issues will be required at a cost of \\( 5,500 \\). Required: (a) Provide a brief explanation (using examples from the case above) for each of the following terms: (i) Sunk cost; (iii) Incremental cost. Using relevant costing principles, determine whether or not Rolls plc. should undertake the contract. Your answer must include an explanation for the inclusion or exclusion of each of the points 1 to 8 above. List four qualitative factors that should be considered before a final decision is made