The following information relates to the cost estimate above:

$1.$ The cardboard to be used is currently in stock at a value of R$3750.$ It is a specific colour

which has not been used for some time. The replacement price of the cardboard is R$5000,$

while its scrap value is $25\%$ of its replacement cost. The production manager does not

foresee any alternative use for the cardboard if it is not used for the prospective tender.

$2.$ The inks required are not held in stock. They would have to be purchased in bulk at a

cost of R$1500.90\%$ of the ink purchased would be used in printing the posters. No other

use is foreseen for the remainder.

$3.$ Skilled labour is underemployed and is only paid for hours worked. However,

If this printing job is accepted, not only will they become fully employed but

$50\%$ of the time required would be worked at weekends, for which a Premium of $25\%$ above

the normal hourly rate is paid. The norm al hourly rate is R$20\mathrm{.}00$ per hour.

$4.$ Unskilled labour is presently under$-$utilized and $200$ hours per week is recorded as idle

time for which the labourers are however paid. If the printing work is carried out on the

weekend, $25$ unskilled hours will be worked during this time. The employees concerned

would be given two hours$$ time off in lieu of each hour worked on the weekend. The time off

will reduce idle time currently being experienced.

$5.$ Variable overheads represent the cost of operating the printer.

$6.$ When not being used by the company, the printer is hired to outside companies for

R$30\mathrm{.}00$ per hour. This earns a contribution of R$15\mathrm{.}00$ per hour. There is unlimited demand

for this facility.

$7.$ Printer depreciation represents the estimated loss in market value per hour of usage.

$8.$ Fixed production costs are absorbed into production using predetermined hourly rates.

$9.$ The estimating costs are an allocation of the department's existing costs based on time

spent in discussions with the community's organizing committee for the printing of the

posters.

$10.$ The company's policy is to apply a $20\%$ mark$-$up on total production costs to recover

administration costs and then to have a profit equal to $20\%$ of the selling price. However, as

the company would like to secure the order, the mark$-$up to recover the administration costs

will remain, but the profit mark$$ up will be $10\%$ of the selling price.

REQUIRED:

$1.$ Calculate the minimum selling price that the company should quote for the order. Give

reasons for your inclusion or exclusion of all costs given in the question. $(25)$

$2.$ Discuss five qualitative factors which should be considered when making the decision.

$(10)$