Question 4.25 Calculation 0f minimum selling price You have received a request from EXE plc to provide a quotation for the manufacture of a specialized piece of equipment. This would be a oneoff order. in excess of normal budgeted production. The following cost estimate has already been prepared: Note {3 Direct materials: Steel 10 m2 at 5.00 per sq. metre 1 50 Brass ttings 2 20 Direct labour Skilled 15 hours at 10.00 per hour 3 200 Unskilled 10 hours at 3 .00 per hour 4 80 Overhead 35 hours at 10.00 per hour 5 350 Estimating time 6 100 350 Administrative overhead at 20% of production cost 7 1020 Prot at 25% of total cost 8 25; Selling price 1215 Notes": 1. The steel is regularly used. and has a current stock value of 5.00 per sq. metre. There are currently 100 sq. metres in stock. The steel is readily available at a price of 5.50 per sq. metre. 2. The brass ttings would have to be bought specically for this job: a supplier has quoted the price of 20 for the ttings required. 3. The skilled labour is currently employed by your company and paid at a rate of 10.00 per hour. If this job were undertaken it would be necessary either to work 25 hours overtime which would be paid at time plus one half or to reduce production of another product which earns a contribution of 13.00 per hour. 4. The unskilled labour currently has sufficient paid idle time to be able to complete this work. 5. The overhead absorption rate includes power costs which are directly related to machine usage. Ifthis job were undertaken. it is estimated that the machine time required would be ten hours. The machines incur power costs of 035 per hour. There are no other overhead costs which can be specifically identied with this job. 6. The cost of the estimating time is that attributed to the four hours taken by the engineers to analyse the drawings and determine the cost estimate given above