Robust Transport Limited has invited, among others, Average Automobiles Limited to submit a design

for CNG bus and also to submit a bid to produce $100$ such buses.

Average Automobile has suffered from considerable excess capacity due to the recession in the

industry and perceives little prospects of improving the situation in the future. Consequently, it readily

accepts the invitation of Robust Transport and spends Rs $15$ lakh on the cost and design studies

$($especially suited for Indian road conditions$).$

Average Automobiles Ltd has submitted a bid price of Rs $15$ lakh per bus on the basis of the following

budgeted income statement:

$*$Existing labour cost will continue even if it's not awarded the contract

Robust Transport prefers Average Automobiles' design vis$--$vis others, but considers a bid price of Rs

$15$ lakh per bus too high as compared to other competitors. Hence, it makes a counter offer to award

the contract at a price of Rs $11$ lakh per bus.

a$)$ What is the total incremental$/$relevant cost for Average Automobiles as per their analysis?

$[2$ marks$]$