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its products. The contract will last for 50 weeks. The accountant at Glenrock has prepared the following estimates: Material X in stock at original cost Material Y on order (contract price) Material Z to be ordered $ 150,000 180,000 300,000 Labour: Skilled Men Non - Skilled Men Supervisory Staff 540,000 300,000 100,000 General Overheads 1.080.000 2,650,000 Total Cost Additional information is available as follows: a) Material X is an obsolete material. It can, however be used as a substitute on another contract for material costing $135,000 after some adaptation work which would cost $27,000. b) Material Y was ordered some weeks ago for other work for which is no longer required. It now has no residual value and if not used, has to be disposed of at a cost of $5,000. c) The skilled men will be transferred from other work to this contract. Their places on the other work will be filled with a greater number of less skilled workers at a cost of $570,000 for a 50 week period. d) The non- skilled labour will be specially employed for the contract period. e) The supervisory staff will be retained, whether or not the contract is accepted, at the present salary levels. If available, two of them could be used to fill junior management vacancies for the period of the contract. The management vacancies have a total salary bill of $35,000.The remaining supervisors would be used as covers for holidays, sickness, etc. f) General Overheads have been charged at 200% of skilled wage cost. Only $125,000 would be avoidable if the contract does not go ahead. Required: Determine the minimum contract price for the contract.

its products. The contract will last for 50 weeks. The accountant at Glenrock has prepared the following estimates: Material X in stock at original cost Material Y on order (contract price) Material Z to be ordered $ 150,000 180,000 300,000 Labour: Skilled Men Non - Skilled Men Supervisory Staff 540,000 300,000 100,000 General Overheads 1.080.000 2,650,000 Total Cost Additional information is available as follows: a) Material X is an obsolete material. It can, however be used as a substitute on another contract for material costing $135,000 after some adaptation work which would cost $27,000. b) Material Y was ordered some weeks ago for other work for which is no longer required. It now has no residual value and if not used, has to be disposed of at a cost of $5,000. c) The skilled men will be transferred from other work to this contract. Their places on the other work will be filled with a greater number of less skilled workers at a cost of $570,000 for a 50 week period. d) The non- skilled labour will be specially employed for the contract period. e) The supervisory staff will be retained, whether or not the contract is accepted, at the present salary levels. If available, two of them could be used to fill junior management vacancies for the period of the contract. The management vacancies have a total salary bill of $35,000.The remaining supervisors would be used as covers for holidays, sickness, etc. f) General Overheads have been charged at 200% of skilled wage cost. Only $125,000 would be avoidable if the contract does not go ahead. Required: Determine the minimum contract price for the contract.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Glenrock Ltd is considering whether to supply a large departmental store with its products. The contract will last for 50 weeks. The accountant at Glenrock has prepared the following estimates: Material X in stock at original cost Material Y on order (contract price) Material Z to be ordered $ 150,000 180,000 300,000 Labour : Skilled Men Non - Skilled Men Supervisory Staff 540,000 300,000 100,000 General Overheads Total Cost 1.080.000 2,650,000 Additional information is available as follows: a) Material X is an obsolete material. It can, however be used as a substitute on another contract for material costing $135,000 after some adaptation work which would cost $27,000. b) Material Y was ordered some weeks ago for other work for which is no longer required. It now has no residual value and if not used, has to be disposed of at a cost of $5,000. c) The skilled men will be transferred from other work to this contract. Their places on the other work will be filled with a greater number of less skilled workers at a cost of $570,000 for a 50 week period. d) The non- skilled labour will be specially employed for the contract period. e) The supervisory staff will be retained, whether or not the contract is accepted, at the present salary levels. If available, two of them could be used to fill junior management vacancies for the period of the contract. The management vacancies have a total salary bill of $35,000.The remaining supervisors would be used as covers for holidays, sickness, etc. f) General Overheads have been charged at 200% of skilled wage cost. Only $125,000 would be avoidable if the contract does not go ahead. Required: Determine the minimum contract price for the contract.
Transcribed Image Text:Glenrock Ltd is considering whether to supply a large departmental store with its products. The contract will last for 50 weeks. The accountant at Glenrock has prepared the following estimates: Material X in stock at original cost Material Y on order (contract price) Material Z to be ordered $ 150,000 180,000 300,000 Labour : Skilled Men Non - Skilled Men Supervisory Staff 540,000 300,000 100,000 General Overheads Total Cost 1.080.000 2,650,000 Additional information is available as follows: a) Material X is an obsolete material. It can, however be used as a substitute on another contract for material costing $135,000 after some adaptation work which would cost $27,000. b) Material Y was ordered some weeks ago for other work for which is no longer required. It now has no residual value and if not used, has to be disposed of at a cost of $5,000. c) The skilled men will be transferred from other work to this contract. Their places on the other work will be filled with a greater number of less skilled workers at a cost of $570,000 for a 50 week period. d) The non- skilled labour will be specially employed for the contract period. e) The supervisory staff will be retained, whether or not the contract is accepted, at the present salary levels. If available, two of them could be used to fill junior management vacancies for the period of the contract. The management vacancies have a total salary bill of $35,000.The remaining supervisors would be used as covers for holidays, sickness, etc. f) General Overheads have been charged at 200% of skilled wage cost. Only $125,000 would be avoidable if the contract does not go ahead. Required: Determine the minimum contract price for the contract.
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