Bamboo Limited is a highly specialist firm of central heating

Bamboo Limited is a highly specialist firm of central heating suppliers operating exclusively in the textiles industry. It has recently been asked to tender for a contract for a prospective customer. The following details relate to the proposed contract.

1. Materials:

£20,000 of materials would need to be purchased.

£10,000 of materials would need to be transferred from another contract (these materials would need to be replaced).

Some obsolete stock would be used. The stock had originally cost £18,000. Its current disposable value is £4000.

2. The contract would involve labour costs of £60,000, of which £30,000 would be incurred regardless of whether the contract was undertaken.

3. The production manager will have to work several evenings a week during the progress of the contract. He is paid a salary of £30,000 per year, and on successful completion of the contract he would receive a bonus of £5000.

4. Additional administrative expenses incurred in undertaking the contract are estimated to be £1000.

5. The company absorbs its fixed overheads at a rate of £10 per machine hour. The contract will require 2000 machine hours.


Required:

Calculate the minimum contract price that would be acceptable to Bamboo Limited.