Q7: (Chapter 2 - Relevant Costing) Bear Ltd is a manufacturer of various types of heating units. Recently one of its large customers, Venus Ltd has offered a contract to Bear Ltd for the supply of 600 units. Below are the details for the production of each unit: Material X: 7kg is required per unit. Currently 2,000 kg is held by the business and it is constantly used. This material of was originally bought for 42 per kg. It would cost 64 per kg to replace it. Sales value is 59 per kg. Material Y: 8 kg is required per unit. Currently 2,800 kg is held by the business. This material of was originally bought for 31 per kg. The material was not used by the business for last two years. Its scrap value is only 8 per kg. Replacement cost for material Y is 22 per kg. The only foreseeable alternative use is as a substitute for material K(in constant use) but this would involve further processing cost of 4 per kg. The current buying cost of material Kis 14 per kg. Material Z: 1.5kg is required per unit. It is regularly used by the business and currently there is none available in the business. An order for 300 kg is shortly to be placed for another project by the business. The price for this material is 80 per kg, but the supplier allows a bulk discount of 10%, for the entire order, for orders of 1,000 kg and above. Skilled labour. Each unit requires 4 hours of skilled labour. It is currently paid at a rate of 25 per hr and skilled labour is hired on a permanent basis. 1.400 hours can be provided by members of staff who currently have no work to do due to a quiet time. Only taking staff off other work can provide the remaining hours needed for this new project. This other work is charged out to customers at 85 an hour. Semi-skilled labour. Each unit requires 3 hours of semi-skilled labour. It is currently paid 11 per hour. If the required semi-skilled labour for this project is provided by the existing members of staff who are busy, the business will have to hire new employees at a rate of 13 per hour. Specialised study: To derive the above estimates, the business had to spend 3,600 on a specialised study. If the contract does not proceed, the results of the study can be sold for 2,100 in the market. Overheads: It is Bear's policy to charge a share of the general costs (rent, heating and so on) to each contract undertaken at the rate of 6 for each semi-skilled labour hour used on the contract. If this project is undertaken, the general costs are expected to increase as a result of undertaking the contract by 1,600. Required Calculate the minimum price at which the contract could be undertaken by Bear Ltd. For each part, you should clearly show supporting workings and provide a brief explanation for your choice.(Total: 10 marks)