Context:

Company SMART has a wage rate of 12 per hour, and variable overhead of machine time costs of 0.75p per hour. SMART has been approached by a business customer to tender for a special contract to supply goods requiring 6000 of materials, 1000 hours of labour and 1000 machine hours. Machine hours are the only scarce resource.

Q1. What is the minimum acceptable price of the special contract?

Q2. What is the opportunity cost associated with the contract?