Meyer Ltd carries out research on behalf of pharmaceutical companies. One research project has just been cancelled due to lack of funding. The client had paid Meyer Ltd 1,050,000, with a further 300,000 due in relation to costs incurred by Meyer Ltd on the project to date. Meyer Ltd's sales manager has located another potential client who has offered to pay 2,100,000 to complete the research project, on the basis it would be completed in six months' time. Meyer Ltd's research director has analysed the cost of completing the research project as follows: Head office costs - Each research project is charged 225,000 which represents an apportionment of head office costs. To support the rescarch project an additional administrator based at head office would be employed for six months at a monthly cost of 3,750. Labour costs (researchers) 20 full-time researchers of Meyer Ltd who are currently idle will work a total of 400 hours each on the project and will be paid 75 per hour. Thereafter, 20 contract research workers will be required to work a total of 400 hours each to complete the research project and each hour of their work will cost 120 per hour. A recruitment fee of 750 per contract employee will have to be paid to an employment agency. Variable overheads on the project will be incurred at a rate of 22.50 per research hour worked. Direct material - Chemical 4Xat - 600 kg will be required to complete the research. This material which originally cost 400 per kg is in stock and has no other use by Meyer Ltd. The inventory manager has located a buyer willing to purchase all this stock for 600 per kg. Meyer Ltd will be expected to transport the stock to the buyer's premises incurring transportation costs of 7,500. Direct material - Bonding Agent - 200 kg will be required to complete the research. This agent which originally cost 120 per kg is in stock and is regularly used by Meyer Ltd. Each kg of agent can be purchased for 75 Direct material - Enzyme - 200 kg which originally cost 3,000 per kg is in stock and will be required to complete the research. If not used to complete the research all enzyme in stock would have to be disposed of at a disposal cost of 150 per kg. The project will occupy 25% of Meyer Ltd's factory for a period of six months. The factory rental charge is 1,800,000 per annum. The factory arca required to complete the project is currently unoccupied and is expected to remain so for at least another six months. If Meyer do not continue with the research project external consultants will be paid off at a cost of 300,000. This represents 50% of the external consultant's original contract price of 600,000. If, on the other hand, the research project is to be continued it would necessitate doubling the value of the external consultant's original contract price Requirement: (a) Advise, from a financial perspective only, whether Meyer should accept the offer of 2,100,000 to complete the research project for the new client? 14 Marks