You are a Logistics Associate for WADICENCE, you have been asked to provide a report to the management for the provision of road transport services from Khazaen Economic City in Oman to Jeddah Corniche in Saudi Arabia. The report should cover the following aspects:

1a) The 725 Km Empty Quarter Highway between Oman and Saudi Arabia has officially opened in December 2021, to promote tourism, trade, and integration of supply chains.

• WADICENCE, one of the leading frankincense oil producers in Oman, which they sell for 30 OMR per bottle.
• The standard annual capacity is 500,000 bottles.
• Sales have slowed down to only 350,000 bottles since the year 2020 due to COVID-19 disruptions.
• This slowdown is expected to last for at least another couple of years due to the emergence of new COVID variants.
• WADICENCE will not lay off labour in the short term (i.e., there will be no change to total labour cost for the next year).
• To improve its sales revenue, WADICENCE is planning to take advantage of the new Empty Quarter Highway and start exporting to Saudi Arabia and has secured an agreement in principle with a major oil distribution company JABELOIL located in Jeddah Corniche.
• JABELOIL has offered to purchase 150,000 bottles annually for the next two years at 15 OMR per bottle.
• Accepting JABELOIL offer will require international road freight to Saudi Arabia, WADICENCE intends to contract this to a transport company SHARIE which is also a freight forwarder and a customs broker.
• All current drivers and vehicles owned by SHARIE are tied into other contracts and they will need to find extra vehicles to take up any assignment.
• SHARIE's quotation for this contract involves a fixed cost element of 150,000 OMR to cover a one-year truck lease, hire a driver under one year contract, and a fixed service charge as a profit margin. In addition, there are variable costs for customs and insurance services at 3 OMR per bottle.
• Below is the standard cost card for the production of 500,000 bottles:

	OMR
	Total
Direct labour	3,150,000
Direct materials	3,000,000
Variable manufacturing overhead	750,000
Fixed manufacturing overhead	2,100,000
Fixed transport and distribution expenses (local 3PL)	787,500
Total Cost	9,787,500
Sales	15,000,000
Profit	5,212,500

• Should WADICENCE accept this offer? (please show the calculations also)