The Sales department of the London branch of the KP Group is planning its annual conference in the French Alps, and has approached a French tour operator (FTO Voyages) for a quote. FTO's manager has produced the following cost plus price estimate for the KP conference: Chalet costs 8,000 Driver costs 3,500 Coach running costs 3,000 General overheads 3,000 E mmmm Sub-total Profit 25% 17,500 4,375 Total 21,875 . . It has been suggested that it might also be useful to evaluate the minimum price at which the contract is viable from FTO's viewpoint. The following Information is available: Chalet costs are the costs of hiring a chalet for the whole group of KP salespeople, for 10 days. Driver costs represent the wages and related employment costs of a driver specifically trained to drive on mountain roads, for 10 days. If this driver is used on the KP contract, FTO would need to replace the driver to fulfil some of its other contracts. Replacement drivers are hired from an agency at a cost of E550 a day. Coach running costs include petrol costs of 2,800, together with an apportionment of the annual fixed costs of running the coach. Should the coach be used on the KP contract, no extra fixed costs would be incurred. Should KP not sign with FTO, the coach would not be in use for six out of the ten days of the conference. For the other four days, a contract has already been accepted which contains a significant financial penalty clause. This contract earns a contribution of E300 per day. A replacement coach could be hired for 930 per day. General overheads are calculated by using FTO's overhead absorption rate. Those overheads are recalculated every year, when FTO prepares its budgets. The only general overheads costs that can be directly linked with KP's project amounted to 600 and were calculated by considering the time spent finalising KP's quote last week. (a) (b) Explain the term 'Relevant costs [3] Prepare a statement showing the minimum price that would be acceptable to [17] FTP. Clearly explain the reasons for each of the values in your quotation, and for excluding any of the costs (if appropriate)