SECTION A [100 MARKS] Answer AlL the questions in this section. QUESTION 1 (15 Marks) Whambe Enginearing Lid is a compary bessed at. Thehangandou. It landers far variaus size contacts in mesi pars of South Africe. begin in danuay rext pear. The price that the company submitted w th which it wen is hid was R432 000000 The company has glso been requgsled to undertake another contract n Bela bela in the Lmpopo provnce. The price fikl. has been offered for this work is RL28 cco cocc. However, due to stating problams, the wo contracts cannot toth te carrid cut at the same tire. Whambe Encinserng has to choose which is te most finarc ally rewarding to tha campary. thls year and pay a penaty dause of f.12 c00 000. Currordy. Whembe Engreering Lod hes an existing contact in Nangaung tom which if rexives a rental incoms of and Bela tels contracts are mulusly exclusive. Wembe Engreering LI is able in wilhdran from the contract in Nangaung, thenks la a clause that was wn tlen into the conlract before it was signed. However, if tis ia dore the compeny The folcuing esimates relating to the costs and revenue of each contact have teen compled: Additional information is as follows: 1. Materal A does nat hase a resak vahes culside of the company, as it is nat used commonly in the enginecrirg rdustry. Il caud be used as a substilule for anaties materia which curenty casis 105 kess than the ariging posi of material A. 2. The grice for material 8 has increased to twice the amount at which it was firt. purchased. Watarial B can be resold at its curent marked prion, in which case the c0ses of dspesa an 12 : of the seling price if not sold, any misteral a pald be used on any future partracts as z dues net deleriorate. 3. The piant fost would be recurnd is camten to bot contrats. If it wers used on the Pela Pels cuniract, all of the ghead, lass plant wil be required. The plant that a not used will be rerted to a neghbourhg tusiness for a lota rental of RP900cc0 during the period of the contrace. of te contact. The customer would pay the comosry progress payments according to the work completed. 5. Both contrecis would run for a 12 month p eriod. 6. Sile foremen are paid an annus salsry. This does not vary accurding ta the amourt of eatk underlaken. They wh however, be expected to stay in lemporary accommodation rear the contract ahe The accemmodetian casts hace been estmaled besed on past experience 7. The cuss of the cerval headqaides corsist af the salaries of the persente who wark in the admiristafun and pagrol departmenta, which amount to Ribi 000000 in tosl. The hegdguartass gupervise approxmaley 15 contrecis al ame gne 5me. B. H is not expecled that labour wil be in short suppyy. Required: Making use of the printiples al relesanl tosing, frepare a stalemert tat compares the relesant net benefits of the two corracts in Rand terma and conclude
