onward submission to Lecturer at or before 2 pm. QUESTION 1 - DECISION MAKING PBL is planning to bid for a project with an expected period of completion of 1 year with the following cost requirements: (1) PBL plans to recruit skilled labour for a total of 9,000 hours during the year. The labour required could be recruited at an hourly rate of GH12. Alternatively, some of the employees currently working on other projects within the company could be transferred to this project. Their hourly rate is GHICIO per hour. If these existing employees were to be transferred to this project, then they would need to be replaced on their existing project work. Replacements for their existing project work would cost Ghell per bour. (2) Unskilled labour would be required for a total of 12,000 hours during the year. These employees would need to be recruited on a one-year contract at a cost of Ghe per hour (3) The project would need to be supervised and it is estimated that there would be a total of 500 hours of supervision required during the year. One of the existing supervisors could undertake this work, but if he did so he would have to work a total of 300 hours overtime during the year to carry out the supervision on this project as well as his existing duties. The supervisor earns a salary of GH50,000 per year for working 2,000 hours and is not paid for overtime work. If this project goes ahead the supervisor will be paid a bonus of GHe 500, which would not be paid if the project is not undertaken. (4) A specialised machine will be required for a total of 10 weeks. It can be hired in from a reputable supplier, who would guarantee its availability when it is required, for GH42.500 per week (9) The machinery has a running cost of GH720 per week. This cost is incurred by the user of the machine (6) It is company policy to depreciate non-current assets by 25% per year on a reducing balance basis. (7) The direct materials required for the project are Materials A and B. With regards to Material A. the total amount required for the project would have to be purchased at a cost of GH15,000. (8) The total amount of Material B required would be 10,000 square metres. The company purchased 25,000 square metres of this material for a project two years ago at a total cost of GH100,000. The earlier project used 20,000 square metres of the material and the remainder is currently held in inventory. The company does not foresee any other use for this material in the future and could sell it for GH-2 per square metre. The current purchase price of the material is GHe per square metre (9) The company has already incurred expenditure of GH425,000 in analysing the resource requirements of the project CI It is company policy to attribute overhead costs to projects using an absorption rate of 40% of prime costs (1) It is company policy to add a 25% profit mark-up to total costs when setting its prices. Required: (a) Prepare a statement that shows the relevant cost of the project. For each of the resources indicated in notes (1) to (10), you must clearly explain the reason for the cost value that you have used (b) PBL used your calculations as the basis of the quotation and then added GH130,000 fot profit. All costs incurred were the same as forecast Required: Explain why the financial profit reports at the end of the year would not show a profit of GHe 130,000 for the project onward submission to Lecturer at or before 2 pm. QUESTION 1 - DECISION MAKING PBL is planning to bid for a project with an expected period of completion of 1 year with the following cost requirements: (1) PBL plans to recruit skilled labour for a total of 9,000 hours during the year. The labour required could be recruited at an hourly rate of GH12. Alternatively, some of the employees currently working on other projects within the company could be transferred to this project. Their hourly rate is GHICIO per hour. If these existing employees were to be transferred to this project, then they would need to be replaced on their existing project work. Replacements for their existing project work would cost Ghell per bour. (2) Unskilled labour would be required for a total of 12,000 hours during the year. These employees would need to be recruited on a one-year contract at a cost of Ghe per hour (3) The project would need to be supervised and it is estimated that there would be a total of 500 hours of supervision required during the year. One of the existing supervisors could undertake this work, but if he did so he would have to work a total of 300 hours overtime during the year to carry out the supervision on this project as well as his existing duties. The supervisor earns a salary of GH50,000 per year for working 2,000 hours and is not paid for overtime work. If this project goes ahead the supervisor will be paid a bonus of GHe 500, which would not be paid if the project is not undertaken. (4) A specialised machine will be required for a total of 10 weeks. It can be hired in from a reputable supplier, who would guarantee its availability when it is required, for GH42.500 per week (9) The machinery has a running cost of GH720 per week. This cost is incurred by the user of the machine (6) It is company policy to depreciate non-current assets by 25% per year on a reducing balance basis. (7) The direct materials required for the project are Materials A and B. With regards to Material A. the total amount required for the project would have to be purchased at a cost of GH15,000. (8) The total amount of Material B required would be 10,000 square metres. The company purchased 25,000 square metres of this material for a project two years ago at a total cost of GH100,000. The earlier project used 20,000 square metres of the material and the remainder is currently held in inventory. The company does not foresee any other use for this material in the future and could sell it for GH-2 per square metre. The current purchase price of the material is GHe per square metre (9) The company has already incurred expenditure of GH425,000 in analysing the resource requirements of the project CI It is company policy to attribute overhead costs to projects using an absorption rate of 40% of prime costs (1) It is company policy to add a 25% profit mark-up to total costs when setting its prices. Required: (a) Prepare a statement that shows the relevant cost of the project. For each of the resources indicated in notes (1) to (10), you must clearly explain the reason for the cost value that you have used (b) PBL used your calculations as the basis of the quotation and then added GH130,000 fot profit. All costs incurred were the same as forecast Required: Explain why the financial profit reports at the end of the year would not show a profit of GHe 130,000 for the project