Prepare a cost statement, using relevant costing principles, and calculate the minimum cost that Wawa Sdn. Bhd. should charge for the contract. Make detailed notes showing how each cost has been arrived at and explain why each of the costs above has been included or excluded from your cost statement. (14 marks)

Wawa Sdn. Bhd. is a company specialising in the provision of telephone systems for commercial clients. There are two parts to the business: (1) installing telephone systems in businesses, either first time installations or replacement installations; supporting the telephone systems with annually renewable maintenance contracts. Wawa Sdn. Bhd. has been approached by a potential customer, Mesra Sdn. Bhd., who wants to install a telephone system in new offices it is opening. Whilst the job is not a particularly large one, Wawa Sdn. Bhd. is hopeful of future business in the form of replacement systems and support contracts for Mesra Sdn. Bhd. Wawa Sdn. Bhd. is therefore keen to quote a competitive price for the job. The following information should be considered: 1. 2. One of the company's salesmen has already been to visit Mesra Sdn. Bhd., to give them a demonstration of the new system, together with a complimentary lunch, the costs of which totalled RM 400. The installation is expected to take one week to complete and would require three engineers, each of whom is paid a monthly salary of RM 4,000. The engineers have just had their annually renewable contract renewed with Wawa Sdn. Bhd. One of the three engineers have spare capacity to complete the work, but the other two would have to be moved from contract X in order to complete this one. Contract X generates a contribution of RM 5 per engineer hour. There are no other engineers available to continue with Contract X if these two engineers are taken off the job. It would mean that Wawa Sdn. Bhd. would miss its contractual completion deadline on Contract X by one week. As a result, Wawa Sdn.Bhd. would have to pay a one-off penalty of RM 500. Since there is no other work scheduled for their engineers in one week's time, it will not be a problem for them to complete Contract X at this point. Wawa Sdn. Bhd.'s technical advisor would also need to dedicate 8 hours of his time to the job. He is working at full capacity, so he would have to work overtime in order to do this. He is paid an hourly rate of RM 40 and is paid for all overtime at a premium of 50% above his usual hourly rate. Two visits would need to be made by the site inspector to approve the completed work. He is an independent contractor who is not employed by Wawa Sdn. Bhd., and charges Mesra Sdn. Bhd. directly for the work. His cost is RM 200 for each visit made. 4. 5. Wawa Sdn. Bhd.'s system trainer would need to spend one day at Mesra Sdn. Bhd. delivering training. He is paid a monthly salary of RM 1,500 but also receives commission of RM 125 for each day spent delivering training at a client's site. 6. 7. 120 telephone handsets would need to be supplied to Mesra Sdn. Bhd. The current cost of these is RM 18.20 each, although Wawa Sdn. Bhd. already has 80 handsets in inventory. These were bought at a price of RM 16.80 each. The handsets are the most popular model on the market and frequently requested by Wawa Sdn. Bhd.'s customers. Mesra Sdn. Bhd. would also need a computerised control system called 'Swipe 2?. The current market price of Swipe 2 is RM 10,800, although Wawa Sdn. Bhd. has an older version of the system, 'Swipe l', in inventory, which could be modified at a cost of RM 4,600. Wawa Sdn. Bhd. paid RM 5,400 for Swipe 1 when it ordered it in error two months ago and has no other use for it. The current market price of Swipe 1 is RM 5,450, although if Wawa Sdn. bhd. tried to sell the one they have, it would be deemed to be used and therefore only worth RM 3,000. 8. 1,000 metres of cable would be required to wire up the system. The cable is used frequently by Wawa Sdn. Bhd. and it has 200 metres in inventory, which cost RM 1.20 per metre. The current market price for the cable is RM 1.30 per metre. 9. You should assume that there are four weeks in each month and that the standard working week is 40 hours long