Clinton Ltd is tendering for two contracts. Details of the contracts are shown below. Contract Contract 1 Units required 800 Unit price (customer expected) 15.00 You have examined the contracts and resource requirements and have established the following: Contract Prime cost resource requirements: Direct materials (contract totals) Direct labour Direct expenses Test events Materials movements Contract 1 2,000 60 hours 130 machine hours Activity cost pool Production scheduling and set-up Product testing (quality control) Raw materials handling Depreciation Other costs Total period production overheads: Activity-based production overhead resource requirements: Production runs 1.50 18 Contract 2 500 37.00 250 Period Cost () Contract 2 2,300 120 hours 70 machine hours Other information: Direct labour is paid at 11.00 per hour. Direct expenses are calculated at 2.00 per machine hour. Activity-based production overhead resource requirements are calculated using the table provided below: 1.50 60 150 Cost driver Production runs 40,000 48,000 Number of test events 32,000 Materials movements 51,200 Machine hours 16,000 Labour hours 187,200 Driver volume 200 1,600 6,400 3,200 800 Required: 8. Calculate the recovery rates for the production overheads of Clinton Ltd using the ABC system. Requirement C.8 = 2.5 marks 9. Calculate the prime costs of the two contracts described. Requirement C.9 = 2 marks 10. Calculate the full production costs of the two contracts described based on ABC method. Show all workings. Requirement C.10 = 5 marks Continued: Clinton Ltd usually calculates selling prices by adding a 60% profit mark-up to total cost. Required: 11. Explain, with reasons and appropriate workings, whether the contract tenders are likely to be successful (from a financial viewpoint only). Requirement C.11 = 2.5 marks