Glenrock Ltd is considering whether to supply a large departmental store with its products. The contract...
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Glenrock Ltd is considering whether to supply a large departmental store with its products. The contract will last for 50 weeks. The accountant at Glenrock has prepared the following estimates: Material X in stock at original cost Material Y on order (contract price) Material Z to be ordered $ 150,000 180,000 300,000 Labour Skilled Men 540,000 Non-Skilled Men 300,000 Supervisory Staff 100,000 General Overheads 1.080,000 Total Cost 2,650,000 Additional information is available as follows: a) Material X is an obsolete material. It can, however be used as a substitute on another contract for material costing $135,000 after some adaptation work which would cost $27,000. b) Material Y was ordered some weeks ago for other work for which is no longer required. It now has no residual value and if not used, has to be disposed of at a cost of $5,000. c) The skilled men will be transferred from other work to this contract. Their places on the other work will be filled with a greater number of less skilled workers at a cost of $570,000 for a 50 week period. d) The non-skilled labour will be specially employed for the contract period. e) The supervisory staff will be retained, whether or not the contract is accepted, at the present salary levels. If available, two of them could be used to fill junior management vacancies for the period of the contract. The management vacancies have a total salary bill of $35,000. The remaining supervisors would be used as covers for holidays, sickness, etc. f) General Overheads have been charged at 200% of skilled wage cost. Only $125,000 would be avoidable if the contract does not go ahead. Required: Determine the minimum contract price for the contract. Glenrock Ltd is considering whether to supply a large departmental store with its products. The contract will last for 50 weeks. The accountant at Glenrock has prepared the following estimates: Material X in stock at original cost Material Y on order (contract price) Material Z to be ordered $ 150,000 180,000 300,000 Labour Skilled Men 540,000 Non-Skilled Men 300,000 Supervisory Staff 100,000 General Overheads 1.080,000 Total Cost 2,650,000 Additional information is available as follows: a) Material X is an obsolete material. It can, however be used as a substitute on another contract for material costing $135,000 after some adaptation work which would cost $27,000. b) Material Y was ordered some weeks ago for other work for which is no longer required. It now has no residual value and if not used, has to be disposed of at a cost of $5,000. c) The skilled men will be transferred from other work to this contract. Their places on the other work will be filled with a greater number of less skilled workers at a cost of $570,000 for a 50 week period. d) The non-skilled labour will be specially employed for the contract period. e) The supervisory staff will be retained, whether or not the contract is accepted, at the present salary levels. If available, two of them could be used to fill junior management vacancies for the period of the contract. The management vacancies have a total salary bill of $35,000. The remaining supervisors would be used as covers for holidays, sickness, etc. f) General Overheads have been charged at 200% of skilled wage cost. Only $125,000 would be avoidable if the contract does not go ahead. Required: Determine the minimum contract price for the contract.
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Related Book For
Financial Analysis with Microsoft Excel
ISBN: 978-1285432274
7th edition
Authors: Timothy R. Mayes, Todd M. Shank
Posted Date:
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