Hemingways Ltd manufactures quality stationary for sale under their premium brand. They have been asked to supply of a one-off bespoke production run. The contract is to be for 500 notepads. The following information is available; (i) Material requirements per notebook: 200g paper per notebook 50g bindings (type A) 50g bespoke leather Note 1. Paper is in continuous use by the company. 50,000g are currently held in stock at a book value of 10p per gram. The current market price is 12p per gram. Note 2. Bindings (type A) are no longer used by the company due to a dramatic increase in cost, however 10,000g are still held in stock at a book value of 5p per gram. The current market price is 20p per gram. Note 3. The bespoke leather will have to be purchased at 10p per gram. (ii) Labour requirements: Each notebook would require five minutes of skilled labour. An employee with the necessary skills is available and is currently paid 20 per hour. A replacement would, however, have to be obtained at a rate of 22 per hour for the work which would otherwise be done by the skilled employee. (iii) Overheads: Hemingways Ltd absorbs overhead by a labour hour rate, currently 20 per hour of which 4 is for variable overhead and 16 for fixed overhead. If this contract is undertaken it is estimated that fixed costs will increase for the duration of the contract , (iii) Overheads: Hemingways Ltd absorbs overhead by a labour hour rate, currently 20 per hour of which 4 is for variable overhead and 16 for fixed overhead. If this contract is undertaken it is estimated that fixed costs will increase for the duration of the contract by 500. The customer is willing to pay up to a maximum of 45 per notebook. Required (a) Make a recommendation to Hemingways Ltd as to whether or not they should go ahead with the contract. Please show all workings and state all assumptions made. [11 marks]