The overseas customer is close to accepting a price of 290,000, which a rival company of Sargikos Ltd has tendered The sales manager feels that a price of 400,000 is the minimum he can charge because costs of 330,000 above do not take in either any capital costs for machinery or profit to be made on the contract After some analysis you ascertain the following The Honshu fabric is in stock at the above cost There is now no alternative use for this fabric within the current product range and plans had already been made to dispose of it all at a cost of 10,000, thus freeing up valuable storage space The Dupont fabric would have to be ordered at the cost shown above The 60,000 direct labour cost relates to workers that would have to be transferred from another project on the shop floor Extra labour will need to be recruited to the other project at a cost of 70,000 Supervision is charged at 10 of direct labour costs but will be carried out by existing staff within their normal duties Overheads, which are a fixed company cost, are currently charged at the rate of 100 on direct labour The project requires specialised machinery which Sargikos Ltd will purchase at a cost of 180,000 but will dispose of for 95,000 at the end of the project Cost the project for the sales manager and advise him on whether or not to tender for the business Sargikos Ltd manufacture medical clothing for local hospitals Their sales manager has approached you, the cost accountant for some costing advice about a one off overseas order that he intends bidding for The costs associated with the order are as follows Materials Dupont fabric 120,000 Honshu fabric 80,000 Direct labour 60,000 Supervision 10,000 Overheads 60,000 330,000 The overseas customer is close to accepting a price of 290,000, which a rival company of Sargikos Ltd has tendered The sales manager feels that a price of 400,000 is the minimum he can charge because costs of 330,000 above do not take in either any capital costs for machinery or profit to be made on the contract

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Posted on Jul 16, 2024

The overseas customer is close to accepting a price of 290,000, which a rival company of Sargikos Ltd has tendered. The sales manager feels that

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The overseas customer is close to accepting a price of 290,000, which a rival company of Sargikos Ltd has tendered. The sales manager feels that a price of 400,000 is the minimum he can charge because costs of 330,000 above do not take in either any capital costs for machinery or profit to be made on the contract.

After some analysis you ascertain the following.

The Honshu fabric is in stock at the above cost. There is now no alternative use for this fabric within the current product range and plans had already been made to dispose of it all at a cost of 10,000, thus freeing up valuable storage space.
The Dupont fabric would have to be ordered at the cost shown above.
The 60,000 direct labour cost relates to workers that would have to be transferred from another project on the shop floor. Extra labour will need to be recruited to the other project at a cost of 70,000.
Supervision is charged at 10% of direct labour costs but will be carried out by existing staff within their normal duties.
Overheads, which are a fixed company cost, are currently charged at the rate of 100% on direct labour.
The project requires specialised machinery which Sargikos Ltd will purchase at a cost of 180,000 but will dispose of for 95,000 at the end of the project.

Cost the project for the sales manager and advise him on whether or not to tender for the business.

Sargikos Ltd manufacture medical clothing for local hospitals. Their sales manager has approached you, the cost accountant; for some costing advice about a one-off overseas order that he intends bidding for. The costs associated with the order are as follows. Materials: Dupont fabric 120,000 Honshu fabric 80,000 Direct labour 60,000 Supervision 10,000 Overheads 60,000 330,000 The overseas customer is close to accepting a price of 290,000, which a rival company of Sargikos Ltd has tendered. The sales manager feels that a price of 400,000 is the minimum he can charge because costs of 330,000 above do not take in either any capital costs for machinery or profit to be made on the contract