SECTIONC Management Accountin Answer ONE question from Section C 6. Henderson Plc is involved in the design and manufacture of custom built factory equipment. The company has just received an enquiry about the supply of 10 machines from a new client in the USA, BRC Ltd. BRC Ltd has informed the company that the maximum price they are willing to pay for each machine is 7,000. Henderson is not operating in its full capacity The following details relates to the production of the machines . Each machine would require 10 units of Material A, which is used regularly by the company. The company has 120 units of Material A in stock, which originally cost 150 per unit. The replacement cost of Material A is 170 per unit. . Each machine would also require 5 units of Material B. The company has 50 units of Material B in stock, as it was purchased a few years ago for use in the production of other equipment which the company no longer produces. The original purchase price for the units of Material B, in stock, was 200 per unit. The replacement cost of Material B is 160 per unit. The resale value for the units of Material B in stock is 140 per unit. Each machine would require 8 units of Material C, a material that the company has never used. The purchase cost per unit of Material C is 250 . 10 skilled hours, per machine, would be required. Skilled workers are paid 20 per hour and are part of the permanent work-force. At present there are 100 paid surplus skilled hours per month. 20 unskilled hours, per machine, would be required. Unskilled workers are paid 12 per hour and are employed on a casual basis . A supervisor, with the necessary experience in the production of similar machines, who is currently paid 40,000 per annum, would be transferred to the job. This would necessitate the hiring of a replacement supervisor for the duration of the contract at a cost of 7,000 . Each machine would require 15 hours processing time on the factory equipment. If the order is not accepted then Henderson Plc would sub- contract the factory equipment to Jones Ltd at a rate of 100 per hour The company estimates that the depreciation charge for using the factory equipment to produce the 10 machines would be 4,000 PTO