Question 1: (Cost Types, Cost behaviour, Pricing) (20 Marks) You are the manager of Bellow Manufacturers (Pty) Ltd. The company operates as a jobbing shop and manufactures Bellows for the Petroleum industry. The company operates a Just in Time inventory system with only minimum stock levels of consumable stock being maintained. Material used in the manufacturing of a bellow consists mainly of Stainless Steel and Mild steel. Stainless steel is imported, and mild steel is locally available. The company outsource the draughtman's function. The company does have its own machine shop, however certain machining tasks are being outsourced. Bellows are being graded depending on where they will be used in the petroleum plant. Heat and pressure are the main deciding factors. Although the company does have its own quality control department, depending on the grade of the Bellow, final quality needs to be signed off by an independent qualified engineer. The company has 18 Employees of which 10 is directly involved in the production of Bellows. Overtime is at time and a half and Sunday and Public Holidays at double time. Nonproduction staff consists of the general Manager, accountant, buyer, sales staff, and general administration staff. The company operates a consumable store. The storeman is also responsible for the receiving of all material on site. The company does have it own fleet of vehicles, but they are only being used for collection and delivery of light weight items. External transporters are being used for the collection of material and the final delivery of the bellows. The factory has its own 24-hour security guard. This function is being outsourced. Selling pricing is based on a gross profit percentage of 45%. The company calculates gross profit as follows: Gross profit = Selling price-production cost. 9| Page PBA4807 MAY/JUN 2022 PORTFOLIO EXAMINATION Recently, the company received a Request for Quote" RFQ, from customer. All the required specifications are listed, and the company needs to submit a quote. The company estimated the following costs to manufacture the bellow: 1. Draughtman to draught the drawings R 2500. 2. Stainless steel: import 25m2 (square meters) of stainless steel at a cost of R1,500 per m. 3. Import cost: The company uses an outside transporter to deliver the stainless steel to site. The cost of delivery is R1,000 per ton. (1 m = 100kg) 4. Mild Steel: purchase 35 mmild steel at a cost of R150 per m. The supplier will deliver to site. 5. 100kg's of welding wire (consumable stock) needed for the job. The total cost of the welding wire issued is R 900. 6. Total estimated production hours are 150 normal hours and 25 overtime hours. Included in the overtime hours are 9 hours to be worked on a public holiday. The average rate of wages is R60 per hour. 7. The job will require the final sign off from an independent engineer. The cost will be R5,000. 8. Outsourced machining: R 2,500. 9. The storeman monthly salary is R9,000 and the factory security is R 7,500. 10. The general manager's salary is R20,000 per month. 11. Manufacturing overheads are being allocated based on the total number of manufacturing hours. The current allocation rate is R80 per hour. 12. The company receives a quote to the value of R 2,750 as delivery cost to the customer. Required: 1. Calculate the estimated selling price of the Bellow. If you exclude any item, please provide the reason. Marks will be allocated to all the items. Use the following table in your workings. Show all your calculations as marks will be awarded for calculations.