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Solid Ltd has been asked to provide a quotation for an engineering project that will take one year to complete. An analysis of the project has already been completed and the following resource requirements have been identified: (1) A specialised machine will be required for a total of 10 weeks. It can be hired in from a reputable supplier, who would guarantee its availability when it is required, for GHc2,500 per week. (2) The machinery has a running cost of GHc 720 per week. This cost is incurred by the user of the machine. (3) It is company policy to depreciate non-current assets by 25% per year on a reducing balance basis. (4) Skilled labour would be required for a total of 9,000 hours during the year. The labour required could be recruited at an hourly rate of GHe12. Alternatively some of the employees currently working on other projects within the company could be transferred to this project. Their hourly rate is GHc10 per hour. If these existing employees were to be transferred to this project then they would need to be replaced on their existing project work. Replacements for their existing project work would cost GHe11 per hour. (5) Unskilled labour would be required for a total of 12,000 hours during the year. These employees would need to be recruited on a one year contract at a cost of GHe8 per hour. (6) The project would need to be supervised and it is estimated that there would be a total of 500 hours of supervision required during the year. One of the existing supervisors could undertake this work, but if he did so he would have to work a total of 300 hours overtime during the year to carry out the supervision on this project as well as his existing duties. The supervisor earns a salary of GHe50,000 per year for working 2,000 hours and is not paid for overtime work. If this project goes ahead the supervisor will be paid a bonus of GHC500, which would not be paid if the project is not undertaken. (7) The direct materials required for the project are Materials A and B. With regards to Material A, the total amount required for the project would have to be purchased at a cost of GHc15,000. (8) The total amount of Material B required would be 10,000 square metres. The company purchased 25,000 square metres of this material for a project two years ago at a total cost of GHc100,000. The earlier project used 20,000 square metres of the material and the remainder is currently held in inventory. The company does not foresee any other use for this material in the future and could sell it for GHe2 per square metre. The current purchase price of the material is GHes per square metre. (9) The company has already incurred expenditure of GHe25,000 in analysing the resource requirements of the project. (10) It is company policy to attribute overhead costs to projects using an absorption rate of 40% of prime costs. (11) It is company policy to add a 25% profit mark-up to total costs when setting its prices. Required: (a) Prepare a statement that shows the relevant cost of the project. For each of the resources indicated in notes (1) to (10) you must clearly explain the reason for the cost value that you have used. Solid used your calculations as the basis of the quotation and then added GHe 125,000 for profit. All costs incurred were the same as forecast. Required

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