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The CEO of your company has approached you for advice on a special order for a customer that she intends to tender for. She has
The CEO of your company has approached you for advice on a special order for a customer that she intends to tender for. She has supplied the following cost estimates: You ascertain the following: 1. The CEO estimates she has spent time in negotiation valued at $5,000. 2. Material J is in stock and the original cost is given above. There is no other use for material J, apart from using it on the special order within the factory and it would cost $3,500 to dispose of. Material K would have to be ordered at the cost shown above. 3. Direct labour costs of $12,000 relate to workers who will be transferred to the special order from another project, in replacement extra labour will need to be recruited to the other project at a cost of $14,000. 4. Supervision costs have been charged to the project on the basis of 331/3% of labour costs. Supervision will be carried out by existing staff within their normal duties. 5. Overheads have been charged to the project at the rate of 200% on direct labour. 6. The project will need machinery that will have no other use to the company apart from the special order. The machinery will have to be purchased at a cost of $20,000 and the disposed of for $10,500 when the special order is completed
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