Grace is about to tender for a contract which requires the use of two raw materials: steel and tungsten. Five hundred (500) tons of steel and 1,000 tons of tungsten will be required to complete the contract. In addition, 2,000hours of labour will be needed. Of this 1,200 hours are in assembly process and the remainder (800 hours) in the finishing process. Grace will quote a price that allows a 50% mark-up on relevant cost.

The following additional information is available for the resources required

Inventory Now (Tons)

Original price per ton (TZS)

Current Price per ton (TZS)

Net realizable value (TZS)

Steel

200

10,000

12,000

8,000

Tungsten

400

20,000

23,000

15,000

Steel cannot be used by Grace for any other purposes, but tungsten is used in all the company's manufacturing processes

All labour is paid at TZS 4,000 per hour, but to complete the contract in time, labour for the finishing process will be transferred from other work which generates contribution at the rate of TZS 3,000 per hour. There is currently surplus capacity for assembly labour amounting to 1,000 hours for the duration of the contact. Owing to other agent work, any additional assembly labour will have to be hired on a temporary basis at the rate of TZS 5,000 per hour.

Required

Determine minimum price Grace will quote on the contact