Qualigates (Pty) Ltd is a South African company that specialises in the manufacturing of steel gates. The company has received a special order from Lebowa (Pty) Ltd to design and manufacture 40 steel gates. The gates will be completed over the next two months. The direct material requirements to manufacture each one of these special order steel gates include 2 metres of treated steel, 20 grams of screws and 1 litre of special paint. Additional information: 1. Qualigates (Pty) Ltd has the necessary skills in-house to design the gates, but their designers are all currently occupied with other projects. An external designer will be contracted at a total cost of R8 000 to design the steel gates for this order. The external designer requested an administrative assistant. It was agreed that the receptionist of Qualigates (Pty) Ltd, with a salary of R10 000 per month, has some spare capacity and will assist the external designer for a period of 10 days. 2. The treated steel for these gates will be purchased from a local supplier at the current purchase price of R120 per metre. The steel will be treated to avoid rusting. All the steel treatment will be done at the steel suppliers premises at an additional cost to Qualigates (Pty) Ltd of R0,30 per centimetre of steel. The steel treatment will be done by an experienced specialist employed by the steel supplier. The steel treatment specialist earns a salary of R4 000 per month. 3. 200 grams of screws are in inventory at present. The cost of these screws was R780 per kilogram at the time that they were purchased. Screws are used in all the gates that Qualigates (Pty) Ltd produces, and the current wholesale price is R800 per kilogram. 4. Qualigates (Pty) Ltd manufactured some gates about 6 months ago that also required the similar special paint. The company currently has in hand the exact quantity that is required of the special paint. The paint will expire within three weeks of the special order steel gates being completed and will become toxic after the expiry date. The special paint will have to be disposed of in a manner currently required by legislation. The special paint in inventory originally cost the company R2 400, and will be disposed of at a cost of R3 000 if it is not used in this order. 5. The company bought a welding machine two years ago at a cost of R100 000, to weld all the steel gates that the company produces. The machine has an estimated useful life of 5 years. The machine will undergo its normal annual maintenance, a month after the completion of the special order at a cost of R10 000. This scheduled annual maintenance will not affect the delivery date of the gates. 6. To meet the deadline for the special order, one permanent employee, who can be used on another project (salary R6 000 per month), will be allocated to the special order project for the entire period of completing the special order. Another permanent employee, with full capacity available (salary R4 000 per month), will also be allocated to the special order project for its full completion period. One casual worker will also be hired to work on the order at a cost of R3 000 per month. These employees will be supervised, in addition to his normal responsibilities but within his normal working hours, by the company factory supervisor who earns a monthly salary of R12 000. 7. Qualigates (Pty) Ltd owns the manufacturing facility that it uses for all its gates. The company pays the local municipality monthly rates of R1 500 in terms of this property. All completed gates will be stored at a warehouse which the company leases at a fixed monthly cost of R3 000. The lease agreement is for the next five years and has no early cancellation policy. 8. The monthly fixed factory manufacturing overheads are normally R50 000, but it is expected to increase to R55 000 per month for the next two months, due to additional cash expenditure being required because of this order.

Required (a) Determine the total minimum price for the 40 gates that should be charged for the order received from Lebowa (Pty) Ltd. Note: Strictly present your answer in a tabular format. Clearly indicate all the costs that should be AND all the costs that should not be considered for the special order. Where a cost is irrelevant, indicate the amount/adjustment with a R0 (nil-value). For each cost that should OR should not be included, briefly state a reason for its inclusion/exclusion. Ignore VAT and all other taxation implications.(15) (b) Briefly discuss five qualitative factors that Qualigates (Pty) Ltd should take into consideration before accepting the order from Lebowa (Pty) Ltd. (5)