You are the Chief Operating Officer for a small machine shop. The company has been in business for over 30 years. The company for the most part has been quite profitable although in recent years competition has increased and profits have fallen and the business is now losing money. About four years agoin an attempt to help address this trendthe company began to offer water jet cutting services. A water jet machine uses an extremely fine sand grit mixed with water. This solution is shot through a nozzle at high pressure to cut various materials. The advantage of such a machine is that you can obtain a very fine edge without using heat found in a laser machine which can distort the characteristics of the material being cut. One of your sales staff has requested your input on pricing for the water jet cutting service regarding a potential new client. You have known the sales person as one who always wants to sell the best service at the lowest price rather than learn how to handle an objection. In any case, you agree to review the circumstances. One of your existing clients is the UNO company for whom you have supplied various services over the years. The UNO company is a local business that specializes in stainless steel fabrication of conveyor systems. Your company has been supplying water jet cutting services to UNO for the last four years at $150/hr. which is consistent with local rates. UNO has the ability to purchase their own waterjet machine but up to this point UNO has preferred to work with you. The second client is ECONO, a large company located in Selmer, New Jersey. You have not done business with ECONO before thus, it would be all new business. You became aware of ECONO from a bid service that you subscribe to on a yearly basis. You are not sure at this time if the ECONO business would be ongoing relationship. To help guide your input, you have compiled the following information: The water jet machine originally cost $600,000 and an expected life of 100,000 hours. The water jet area takes up about 8,000 square feet in a building with 40,000 square feet. The business does have other activities occurring in the other 32,000 square feet. Total building costs run $27,500/month which includes rent, taxes, maintenance, etc. The machine operator gets paid $18.00/hour including the cost of benefits. The machine is currently used about 6 hours per day on UNO business. Water usage is minimal as all water gets recycled. The grit, nozzles, and electricity to run the machine costs about $4.00/hour. All material is supplied by the client. You do not need to worry about freight. If you get the ECONO job, the new client would use up about 2 additional hours/day of machine time, The company's production plant is currently open 5 days/week. All production employees work one production shift of 8 hours each day. Below I will ask you to submit a bid for the new Econo client. Your bid must meet the following requirements: 1. Your bid must be presented on a Per Hour Basis. For example, you charge the existing client UNO $150/hour for your waterjet services. How much per hour will you charge Econo? a. 2. Your minimum bid cannot be less than twice your total costs on a per hour basis. You can always submit a higher bid but you cannot go lower than twice your total costs. As the bid needs to be on a per hour basis, you will need figure out the costs on a per hour basis. + Machine Costs/Hour: b. + Building Costs/Hour: + Labor Costs/Hour: d. + Grits/Sand/Hour: = Total Costs: f. Multiply * 2 g. = Minimum Bid: c. e. 3. To keep you honest, please show your work/assumptions you used to derive your cost information. Some components may require you to make some assumptions and/or ask questions. Students will use different assumptions. There isn't necessarily a right or wrong assumption. As long as you are thinking like an economist and following a rational method, I will be okay with it. Just share with me your rationale. Also, feel free to email and/or text me with questions. Since this problem is a competitive bid, you only get the information if you ask the question. Question 1. What is your bid for the new Econo business? Please submit your answer in the assignment drop box if taking online or your instructor will gather in class. a. 10 points for submitting you bid and outlining your cost assumptions. b. If you submit the lowest bid while staying within the constraints listed, I will award you a perfect score on one assignment of your choice from Unit One or Unit Two in this course. The instructor reserves the right to determine the lowest bid and to reject all bids if I suspect illegal price collusion. Good Luck