The Vodafone Co (Voda Co) is a company specialising in the provision of telephone systems for commercial clients. There are two parts to the business:

• installing telephone systems in businesses, either first time installations or replacement installations;
• supporting the telephone systems with annually renewable maintenance contracts.

Voda Co has been approached by a potential customer, Tata Co, who wants to install a telephone system in new offices it is opening. Whilst the job is not a particularly large one, Voda Co is hopeful of future business in the form of replacement systems and support contracts for Tata Co. Voda Co is therefore keen to quote a competitive price for the job. The following information should be considered:

1. One of the companys salesmen has already been to visit Tata Co, to give them a demonstration of the new system, together with a complimentary lunch, the costs of which totalled GHS400,000.
2. The installation is expected to take one week to complete and would require three engineers, each of whom is paid a monthly salary of GHS4,000,000. The engineers have just had their annually renewable contract renewed with Voda Co. One of the three engineers has spare capacity to complete the work, but the other two would have to be moved from contract X in order to complete this one. Contract X generates a contribution of GHS5,000 per engineer hour. There are no other engineers available to continue with Contract X if these two engineers are taken off the job. It would mean that Voda Co would miss its contractual completion deadline on Contract X by one week. As a result, Voda Co would have to pay a one-off penalty of GHS1,000,000. Since there is no other work scheduled for their engineers in one weeks time, it will not be a problem for them to complete Contract X at this point.
3. Voda Cos technical advisor would also need to dedicate eight hours of his time to the job. He is working at full capacity, so he would have to work overtime in order to do this. He is paid an hourly rate of GHS80,000 and is paid for all overtime at a premium of 100% above his usual hourly rate.
4. Two visits would need to be made by the site inspector to approve the completed work. He is an independent contractor who is not employed by Voda Co, and charges Tata Co directly for the work. His cost is GHS200,000 for each visit made.
5. Voda Cos system trainer would need to spend one day at Tata Co delivering training. He is paid a monthly salary of GHS1,500,000 but also receives commission of GHS250,000 for each day spent delivering training at a clients site.
6. 100 telephone handsets would need to be supplied to Tata Co. The current cost of these is GHS36,400 each, although Voda Co already has 80 handsets in inventory. These were bought at a price of GHS25,200 each. The handsets are the most popular model on the market and frequently requested by Voda Cos customers.
7. Tata Co would also need a computerised control system called Swipe 2. The current market price of Swipe 2 is GHS10,800,000, although Voda Co has an older version of the system, Swipe 1, in inventory, which could be modified at a cost of GHS4,600,000. Voda Co paid GHS5,400,000 for Swipe 1 when it ordered it in error two months ago and has no other use for it. The current market price of Swipe 1 is GHS5,450,000, although if Voda Co tried to sell the one they have, it would be deemed to be used and therefore only worth GHS3,000,000.
8. 1,000 metres of cable would be required to wire up the system. The cable is used frequently by Voda Co and it has 200 metres in inventory, which cost GHS2,400 per metre. The current market price for the cable is GHS2,600 per metre.
9. You should assume that there are four weeks in each month and that the standard working week is 40 hours long.

10. Required:

    Prepare a cost statement, using relevant costing principles, showing the minimum cost that Voda Co should charge for the contract. Make DETAILED notes showing how each cost has been arrived at and EXPLAINING why each of the costs above has been included or excluded from your cost statement. (20 marks) NOTE: THE ANSWER MUST BE TYPED AND PRESENTED IN A STATEMENT FORM IN AN ORDERLY MANNER