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Test your understanding 5 Mr Smith has been asked to quote a price for a special contract Hehas already prepared his tender but has asked you to reviewit for him He has pointed out to you that he wants to quote the minimum priceas he believes this will ead to more lucrative work in the future Mr Smith's tender A2,000 kgs@$10 per kg B1,000 kgs@$15 per kg C 500 kgs@$40 per kg D 50 litres@$12 per litre Skilled 1,000 hrs@$25 per hr Semi-skilled 2,000 hrs@$15 per hr Unskilled, 500 hrs@ $10 per hr 20,000 15,000 20,000 600 Material Labour 25,000 30,000 5,000 Fixed overheads 3,500 hrs@$12 per hr 42,000 Costs of preparing the tender Mr Smith's time 1,000 500 7,725 other expenses Minimum profit (5% of total costs) Minimum tender price 166,825 Other information Material A 1,000 kgs of this material is in stock at a cost of $5 per kg Mr Smith has no alternative use for his material and intends selling it for $2 per kg However, if he sold any he would have to pay a fixed sum of $300 to cover deivery costs The current purchase price is $10 per kg Minimum tender price 166,825 Other information Material A 1,000 kgs of this material is in stock at a cost of $5 per kg .Mr Smith has no alternative use for his material and intends selling it for $2 per kg However, if he sold any he would have to pay a fxed sum of $300 to cover delivery costs .The current purchase price is $10 per kg Material B .There is plenty of Material B in stock and it cost $18 per kg The current purchase price is $15 per kg .The material is constantly used by Mr Smith in his business Material C The total amount in stock of 500 kgs was bought for $10,000 some time ago for another one-off contract that never happened Mr Smith is considering selling it for $6,000 in total or using it as a substitute for another material, constantly used in normal production If used in this latter manner it would save $8,000 of the other material Current purchase price is $40 per kg Material D . There are 100 itres of this material in stock It is dangerous and if not used in this contract will have to be disposed of at a cost to Mr Smith of $50 per litre. The current purchase price is $12 per litre. Skilled labour .Mr Smith only hires skilled labour when he needs it 525 per hour is the current hourly rate Semi-skilled labour Mr Smith has a workforce of 50 semi-skiled labourers who are currently not fully utilised . They are on annual contracts and the number of spare hours currently available for this project are 1.500 Any hours in excess of this will have to be paid for half .The normal hourly rate is $15 per hour Unskitled labour .These are currently fully employed by Mr Smith on jobs where they produce a contribution of $2 per unskilled labour hour Their current rate is $10 per hour, although extra could be hired at $20 an hour if necessary Foxed overheads This is considered by Mr Smith to be an accurate estimate of the hourly rate based on his existing production Costs of preparing the tender is dangerous and il not used in this contract will have The current purchase price is $12 per iMre poed of at a cost to Mr Smith of $50 per litre. Skilled labour .Mr Smith only hires skilled labour when he needs it $25 per hour is the current hourly rate Semi-skilled labour Mr Smith has a workforce of 50 semi-skiled labourers who are currently not fully utilised They are on annual contracts and the number of spare hours currently available for this project are 1,500. Any hours in excess of this will have to be paid for at time-and-a- halt The normal hourly rate is $15 per hour Unskilled labour These are currently fuly employed by Mr Smith on jobs where they produce a contribution of $2 per unskilled labour hour Their current rate is $10 per hour, although extra could be hired at $20 an hour it necessary Ftxed overheads This is considered by Mr Smith to be an accurate estimate of the hourly rate based on his existing production Costs of preparing the tender Mr Smith has spent 10 hours working on this project at $100 per hour, which he believes is his charge-out rate. Other expenses include the cost of travel and research spent by Mr Smith on the project Prot This is Mr Smith's minimum proit margin which he beleves is necessary to cover 'general day-to-day expenses of running a business Required Calculate and explain for Mr Smith what you believe the minimum tender price should be. Test your understanding 5 Mr Smith has been asked to quote a price for a special contract Hehas already prepared his tender but has asked you to reviewit for him He has pointed out to you that he wants to quote the minimum priceas he believes this will ead to more lucrative work in the future Mr Smith's tender A2,000 kgs@$10 per kg B1,000 kgs@$15 per kg C 500 kgs@$40 per kg D 50 litres@$12 per litre Skilled 1,000 hrs@$25 per hr Semi-skilled 2,000 hrs@$15 per hr Unskilled, 500 hrs@ $10 per hr 20,000 15,000 20,000 600 Material Labour 25,000 30,000 5,000 Fixed overheads 3,500 hrs@$12 per hr 42,000 Costs of preparing the tender Mr Smith's time 1,000 500 7,725 other expenses Minimum profit (5% of total costs) Minimum tender price 166,825 Other information Material A 1,000 kgs of this material is in stock at a cost of $5 per kg Mr Smith has no alternative use for his material and intends selling it for $2 per kg However, if he sold any he would have to pay a fixed sum of $300 to cover deivery costs The current purchase price is $10 per kg Minimum tender price 166,825 Other information Material A 1,000 kgs of this material is in stock at a cost of $5 per kg .Mr Smith has no alternative use for his material and intends selling it for $2 per kg However, if he sold any he would have to pay a fxed sum of $300 to cover delivery costs .The current purchase price is $10 per kg Material B .There is plenty of Material B in stock and it cost $18 per kg The current purchase price is $15 per kg .The material is constantly used by Mr Smith in his business Material C The total amount in stock of 500 kgs was bought for $10,000 some time ago for another one-off contract that never happened Mr Smith is considering selling it for $6,000 in total or using it as a substitute for another material, constantly used in normal production If used in this latter manner it would save $8,000 of the other material Current purchase price is $40 per kg Material D . There are 100 itres of this material in stock It is dangerous and if not used in this contract will have to be disposed of at a cost to Mr Smith of $50 per litre. The current purchase price is $12 per litre. Skilled labour .Mr Smith only hires skilled labour when he needs it 525 per hour is the current hourly rate Semi-skilled labour Mr Smith has a workforce of 50 semi-skiled labourers who are currently not fully utilised . They are on annual contracts and the number of spare hours currently available for this project are 1.500 Any hours in excess of this will have to be paid for half .The normal hourly rate is $15 per hour Unskitled labour .These are currently fully employed by Mr Smith on jobs where they produce a contribution of $2 per unskilled labour hour Their current rate is $10 per hour, although extra could be hired at $20 an hour if necessary Foxed overheads This is considered by Mr Smith to be an accurate estimate of the hourly rate based on his existing production Costs of preparing the tender is dangerous and il not used in this contract will have The current purchase price is $12 per iMre poed of at a cost to Mr Smith of $50 per litre. Skilled labour .Mr Smith only hires skilled labour when he needs it $25 per hour is the current hourly rate Semi-skilled labour Mr Smith has a workforce of 50 semi-skiled labourers who are currently not fully utilised They are on annual contracts and the number of spare hours currently available for this project are 1,500. Any hours in excess of this will have to be paid for at time-and-a- halt The normal hourly rate is $15 per hour Unskilled labour These are currently fuly employed by Mr Smith on jobs where they produce a contribution of $2 per unskilled labour hour Their current rate is $10 per hour, although extra could be hired at $20 an hour it necessary Ftxed overheads This is considered by Mr Smith to be an accurate estimate of the hourly rate based on his existing production Costs of preparing the tender Mr Smith has spent 10 hours working on this project at $100 per hour, which he believes is his charge-out rate. Other expenses include the cost of travel and research spent by Mr Smith on the project Prot This is Mr Smith's minimum proit margin which he beleves is necessary to cover 'general day-to-day expenses of running a business Required Calculate and explain for Mr Smith what you believe the minimum tender price should be