si CMO Aronative assessment Adobe Acrobat Reader Il Id View Window telo ome Tools SCM040 Alternativ.. * SCM040-topic-10-.. P Q / 10 125 . > Question 4 Astra Controls Ltd is an electronic engineering business that specialises in the production of electronic surveillance equipment for security forces throughout the world. Recently it has received a request to produce 10 'Peeping Tom' surveillance units for a foreign government. The Peeping Tom was developed some time ago by the business at a total research and development cost of 220,000. So far there has been no interest shown in the equipment and no units have been produced. The present order seems likely to represent the total sales for the Peeping Tom. The product specification for each unit is set out below: Materials Component A: 3 per unit Component B: 1 per unit Component C: 2 per unit (QUESTION CONTINUES ON NEXT PAGE) 8.27 x 11.69 in Type here to search AD ENG Component A is normally held in inventories as it is widely used throughout the business's product range. There are 15 components currently held. These had cost 1,800 each. The sole supplier of this component has announced an immediate price rise of 5% for further purchases Component B is no longer used for any other of the business's products. At present there are six components in inventories costing 2,000 each. It is possible to buy additional components at a cost of 2,200 each; however, the supplier insists on a minimum order quantity of six components. Any components that are not used on this contract will be disposed of at a total cost to the business of 250, irrespective of the quantity to be disposed of. Component C is used by the business throughout its product range. At present there is none in inventories. However, an order for 20 components for use in another contract is about to be placed. The supplier normally charges 1,600 per component but for orders above 30 components a discount of 10% is available on the total order price Additional materials costing 2,800 in total will have to be bought if the contract is undertaken. Labour Assembly time is estimated at 10 hours for each Peeping Tom unit. The workforce required to assemble the product is paid 7.00 an hour and is in great demand. If the order is accepted the necessary labour will have to be transferred from existing work and, as a result, other orders will be lost. It is estimated that for each hour that labour is transferred to this product 50.00 of sales revenue will be lost but that savings of 15.00 an hour in materials relating to lost sales will be made. Inspection time is estimated at five hours for each Peeping Tom unit Inspection labour search AD ENG 4:52 PM 5/6/2020 acer 2,800 in total will have to be bought if the contacts Additional matenals costing undertaken. Labour Assembly time is estimated at 10 hours for each Peeping Tom unit. The workforce required to assemble the product is paid 7.00 an hour and is in great demand. If the order is accepted the necessary labour will have to be transferred from existing work and, as a result, other orders will be lost. It is estimated that for each hour that labour is transferred to this product 50.00 of sales revenue will be lost but that savings of 15.00 an hour in materials relating to lost sales will be made. Inspection time is estimated at five hours for each Peeping Tom unit. Inspection labour can be provided by paying existing employees overtime which is paid at a 33.33% premium over the standard rate of 6.00 an hour. Overheads The business normally includes a mark-up of 30% to cover overheads. This contract is not expected to give rise to any increases in overheads Required: Prepare an estimate of the absolute minimum price that Astra Controls Ltd could undertake the contract so as to leave the business no worse or better off as a result Page 8 of 10 ere to search AD ENG 5/6/20 si CMO Aronative assessment Adobe Acrobat Reader Il Id View Window telo ome Tools SCM040 Alternativ.. * SCM040-topic-10-.. P Q / 10 125 . > Question 4 Astra Controls Ltd is an electronic engineering business that specialises in the production of electronic surveillance equipment for security forces throughout the world. Recently it has received a request to produce 10 'Peeping Tom' surveillance units for a foreign government. The Peeping Tom was developed some time ago by the business at a total research and development cost of 220,000. So far there has been no interest shown in the equipment and no units have been produced. The present order seems likely to represent the total sales for the Peeping Tom. The product specification for each unit is set out below: Materials Component A: 3 per unit Component B: 1 per unit Component C: 2 per unit (QUESTION CONTINUES ON NEXT PAGE) 8.27 x 11.69 in Type here to search AD ENG Component A is normally held in inventories as it is widely used throughout the business's product range. There are 15 components currently held. These had cost 1,800 each. The sole supplier of this component has announced an immediate price rise of 5% for further purchases Component B is no longer used for any other of the business's products. At present there are six components in inventories costing 2,000 each. It is possible to buy additional components at a cost of 2,200 each; however, the supplier insists on a minimum order quantity of six components. Any components that are not used on this contract will be disposed of at a total cost to the business of 250, irrespective of the quantity to be disposed of. Component C is used by the business throughout its product range. At present there is none in inventories. However, an order for 20 components for use in another contract is about to be placed. The supplier normally charges 1,600 per component but for orders above 30 components a discount of 10% is available on the total order price Additional materials costing 2,800 in total will have to be bought if the contract is undertaken. Labour Assembly time is estimated at 10 hours for each Peeping Tom unit. The workforce required to assemble the product is paid 7.00 an hour and is in great demand. If the order is accepted the necessary labour will have to be transferred from existing work and, as a result, other orders will be lost. It is estimated that for each hour that labour is transferred to this product 50.00 of sales revenue will be lost but that savings of 15.00 an hour in materials relating to lost sales will be made. Inspection time is estimated at five hours for each Peeping Tom unit Inspection labour search AD ENG 4:52 PM 5/6/2020 acer 2,800 in total will have to be bought if the contacts Additional matenals costing undertaken. Labour Assembly time is estimated at 10 hours for each Peeping Tom unit. The workforce required to assemble the product is paid 7.00 an hour and is in great demand. If the order is accepted the necessary labour will have to be transferred from existing work and, as a result, other orders will be lost. It is estimated that for each hour that labour is transferred to this product 50.00 of sales revenue will be lost but that savings of 15.00 an hour in materials relating to lost sales will be made. Inspection time is estimated at five hours for each Peeping Tom unit. Inspection labour can be provided by paying existing employees overtime which is paid at a 33.33% premium over the standard rate of 6.00 an hour. Overheads The business normally includes a mark-up of 30% to cover overheads. This contract is not expected to give rise to any increases in overheads Required: Prepare an estimate of the absolute minimum price that Astra Controls Ltd could undertake the contract so as to leave the business no worse or better off as a result Page 8 of 10 ere to search AD ENG 5/6/20
