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b) The total overhead cost incurred by a company producing CNC-machine products last year was $12,000,000. This overhead could be divided between administration (rent, design, advertising, human resources, accounts, etc.). general factory overheads (rent, power, supervision), and to CNC machinery that ran 200,000 hours (covers depreciation, maintenance, etc). $3,000,000 of the factory overhead has been identified as fixed costs and $1,000.000 variable. The direct material costs last year were $10,000,000; the direct labour, totalling 150,000 person-hours, cost $4,500.000. A new product (with different material and labour requirements to existing products) is to be introduced to the company's product line this year. Engineers have estimated that each unit of this new product will require $4.00 worth of direct material, 10 minutes of a skilled operator's time (at a labour rate of S36/hr), and 12 minutes on a CNC-machine tool (unattended operation). (i) (ii) ESTIMATE the factory cost per unit of this new product DETERMINE the price the new product must be sold for to recover all costs and make a 30% profit. If the company is very keen to win new market for this product (iii) CALCULATE the lowest price that should be charged so that a loss is not incurred (i.e. this new product is considered to be additional to the existing product line, and its marginal cost is desired). JUSTIFY the method you have chosen to solve this problem. (iv)

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