Question 3 Mr. Bond is a manager of an engineering firm specialised in mechanical equipment. Mr. Bond has been asked to quote a price for a special contract. He has already prepared his tender but has asked you to review it for him. He has pointed out to you that he wants to quote the minimum price as he believes this will lead to more lucrative work in the future. Mr. Bond's tender is presented below: Particulars Amount ($) Materials: A: 2,000 kgs @ $12 per kg 24,000 B: 1,000 kgs @ $14 per kg 14,000 C: 500 kgs @ $50 per kg 25,000 D: 50 litres @ $12 per litre 600 Labour: Skilled: 1,000 hrs @ $30 per hour 30,000 Semi-skilled: 2,000 hrs @ $15 per hour 30.000 Unskilled: 500 hrs @ $10 per hour 5.000 Fixed overheads 3,500 hrs @ $12 per hour i 42,000 Mr. Bond 's time for preparing the proposal 1,000 Other expenses 500 Minimum tender price 172,100 Additional information: Material A 1,000 kgs of this material is in stock at a cost of $5 per kg. Mr. Bond has no alternative use for his material and intends selling it for $2 per kg. However, if he sold any he would have to pay a fixed sum of $300 to cover delivery costs. The current purchase price is $12 per kg. Material B There is plenty of Material B in stock and it cost $18 per kg. The current inventory was purchased at $15 per kg. The material is constantly used by Mr. Bond in his business. ACCT1068 Final Assessment SIM, Semester 1, 2020 Page 4 of 5 Material c. The total amount in stock of 500 kgs was bought for $10,000 some time ago for another one-off contract that never happened. Mr. Bond is considering selling it for $6,000 in total or using it as a substitute for another material which is constantly used in normal production. If used in this latter manner, it would save $8,000 of the other material. Current purchase price is $40 per kg. Material D There are 100 litres of this material in stock. It is dangerous and if it is not used in this contract, it will have to be disposed of at a cost to Mr. Bond of $50 per litre. The current purchase price is $12 per litre. Skilled labour Mr. Bond only hires skilled labour when he needs it. $30 per hour is the current hourly rate. Semi--skilled labour Mr. Bond has a workforce of 50 semi--skilled labourers who are currently not fully utilised. They are on annual contracts and the number of spare hours currently available for this project are 1,500. Any hours in excess of this will have to be paid for at twice the normal rate. The normal hourly rate is $20 per hour. Unskilled labour These are currently fully employed by Mr. Bond on jobs where they produce a contribution of $2 per unskilled labour hour. Their current rate is $10 per hour, although extra could be hired at $20 an hour if necessary. Fixed overheads This is considered by Mr. Bond to be an accurate estimate of the hourly rate based on his existing production. Mr Bond's time for preparing the proposal Mr. Bond has spent 10 hours working on this project at $100 per hour, which he believes is his charge-out rate. Other expenses include the cost of travel and research spent by Mr. Bond for preparing the project proposal. Required: Review Mr. Bond's proposal and make any necessary amendments to his calculations and advise Mr. Bond what you believe the minimum tender price should be. Provide appropriate explanations for each change you suggest. (15 Marks) --- END OF QUESTION PAPER --- Question 3 Mr. Bond is a manager of an engineering firm specialised in mechanical equipment. Mr. Bond has been asked to quote a price for a special contract. He has already prepared his tender but has asked you to review it for him. He has pointed out to you that he wants to quote the minimum price as he believes this will lead to more lucrative work in the future. Mr. Bond's tender is presented below: Particulars Amount ($) Materials: A: 2,000 kgs @ $12 per kg 24,000 B: 1,000 kgs @ $14 per kg 14,000 C: 500 kgs @ $50 per kg 25,000 D: 50 litres @ $12 per litre 600 Labour: Skilled: 1,000 hrs @ $30 per hour 30,000 Semi-skilled: 2,000 hrs @ $15 per hour 30.000 Unskilled: 500 hrs @ $10 per hour 5.000 Fixed overheads 3,500 hrs @ $12 per hour i 42,000 Mr. Bond 's time for preparing the proposal 1,000 Other expenses 500 Minimum tender price 172,100 Additional information: Material A 1,000 kgs of this material is in stock at a cost of $5 per kg. Mr. Bond has no alternative use for his material and intends selling it for $2 per kg. However, if he sold any he would have to pay a fixed sum of $300 to cover delivery costs. The current purchase price is $12 per kg. Material B There is plenty of Material B in stock and it cost $18 per kg. The current inventory was purchased at $15 per kg. The material is constantly used by Mr. Bond in his business. ACCT1068 Final Assessment SIM, Semester 1, 2020 Page 4 of 5 Material c. The total amount in stock of 500 kgs was bought for $10,000 some time ago for another one-off contract that never happened. Mr. Bond is considering selling it for $6,000 in total or using it as a substitute for another material which is constantly used in normal production. If used in this latter manner, it would save $8,000 of the other material. Current purchase price is $40 per kg. Material D There are 100 litres of this material in stock. It is dangerous and if it is not used in this contract, it will have to be disposed of at a cost to Mr. Bond of $50 per litre. The current purchase price is $12 per litre. Skilled labour Mr. Bond only hires skilled labour when he needs it. $30 per hour is the current hourly rate. Semi--skilled labour Mr. Bond has a workforce of 50 semi--skilled labourers who are currently not fully utilised. They are on annual contracts and the number of spare hours currently available for this project are 1,500. Any hours in excess of this will have to be paid for at twice the normal rate. The normal hourly rate is $20 per hour. Unskilled labour These are currently fully employed by Mr. Bond on jobs where they produce a contribution of $2 per unskilled labour hour. Their current rate is $10 per hour, although extra could be hired at $20 an hour if necessary. Fixed overheads This is considered by Mr. Bond to be an accurate estimate of the hourly rate based on his existing production. Mr Bond's time for preparing the proposal Mr. Bond has spent 10 hours working on this project at $100 per hour, which he believes is his charge-out rate. Other expenses include the cost of travel and research spent by Mr. Bond for preparing the project proposal. Required: Review Mr. Bond's proposal and make any necessary amendments to his calculations and advise Mr. Bond what you believe the minimum tender price should be. Provide appropriate explanations for each change you suggest. (15 Marks) --- END OF QUESTION PAPER