Interpack Pty (Ltd) was established in 2009 and manufactures Vita Juice (a well-known brand of pure fruit juice), amongst other products.

During September 2021 Interpack received an offer to supply the Windhoek Expo with orange juice. The Windhoek Expo will pay Interpack for providing the juice, even though they will offer it for free to the public at the Expos stalls. This exposure will lead to a marketing cost saving for Interpack of N$20 000 for the year.

The Windhoek Expo is expected to attract about 38 500 people in total over a period of 3 days. The Expo would like to order 13 500 litres of juice for the total duration of the Expo.

The juice will have to be delivered in September 2022. As Interpacks juice range has a good shelf life, it will be produced in August 2022 to be in time for the Expo.

The following steps take place in the production process:

1. Purchase of raw materials:

To produce one litre of orange juice, Interpack needs to purchase on average 7 oranges. The final product only uses an average of 6 oranges per litre as Interpack removes inferior oranges prior to starting the production process. Interpack purchases the oranges at N$0,25 each.

Other products added during production to get the desired texture for the fruit juice cost N$0,12 per 100ml.

2. Transportation of raw materials:

Interpack usually uses Trancor (PTY) Ltd to transport all the fruit needed for production from the suppliers to the factory. One truckload of fruit costs Interpack N$250 in transportation fees. Each truckload contains enough fruit to produce a maximum of 100 litres of orange juice.

Trancor (PTY) Ltd does not however have sufficient capacity to transport the oranges required for the Windhoek Expos order. To overcome this problem Interpack will enter into a short term agreement with another transport company, namely Baycor (PTY) Ltd to transport the oranges required for the Windhoek Expos order to the factory. Baycor (PTY) Ltd will charge Interpack N$300 per truckload. Included in this price is the offloading of the fruit from the truck to the Interpacks storage facility.

Baycor (PTY) Ltd will only transport the oranges for the special order. Baycor (PTY) Ltds trucks can transport enough fruit for the production of 200 litres of orange juice per load.

3. Loading of fruit into the production process:

Semi-skilled labourers are used to load the oranges into the production process. To enable a fast and effective production process, 20 labourers are employed to sort the oranges according to their quality and to load only those of satisfactory quality into the production process.

It takes the labourers 10 minutes to sort and load enough oranges for one production run. Semi-skilled labourers are paid N$150 per hour and work only when they are scheduled and required.

4. Production of the orange juice:

The production process is machine driven. 600 litres of orange juice are produced per production run. Each production run takes 60 minutes.

Variable overheads of N$33 per hour are incurred during the production process. Fixed production overheads allocated to Interpacks total business operations are N$60 000 per month.

Fixed costs are expected to increase if the Windhoek Expos order is accepted.

The fixed production overheads allocated to Interpacks operations, excluding the production of orange juice, amounts to N$38 000 per month.

Normal production for orange juice is 36 500 litres per month. The total (fixed and variable) production overheads for the production of orange juice in August 2022 (including the special order) are expected to amount to N$33 411.

5. Supervision of production process:

Skilled labourers are employed to observe the production process to ensure that all activities comply with Interpacks exceptional quality standards. Supervisors observe the total production run. Interpack employs one supervisor for every 23 850 litres of fruit juice produced. Supervisors earn N$10 000 per month.

The supervisors can be employed at any time. Training for new appointments takes place over 2 days and costs N$200 per day. At the moment the quality supervisors can only manage the current production. If new supervisors are appointed, the contract will stipulate that they should work at least 4 hours per week for at least one full month. These new supervisors will be appointed on a temporary basis only.

Current supervisors wont be retrenched if the production decreases.

6. Packaging of the juice:

Every Juice product is packed into a 1.5 litre bottle. The bottles and lid consist of recycled plastic which costs 60 cents per bottle. Interpacks logo is attached to each bottle at an additional cost of 20 cents per bottle.

The orange juice will be presented in glass containers at the Windheok Expo. Taking this as well as the size of the order into account Interpack has decided to make use of bigger 5 litre cartons to transport the fruit juice. These cartons will cost N$1,20 each.

Required: Calculate the relevant labelling cost if the order is accepted.

NB: You are not required to enter the unit or currency symbol.

Enter a numerical answer with no spaces. For example: 1000

Answer: