urin Ltd has been asked to give a quote for making a large piece of earth-moving equipment. The order will require 80 units of Component 853Q. There are 20 units of this component already held by the business, which cost £45 each. They have a resale value of £30 each. The business uses this component on a regular basis and was about to place an order for 30 more units at a cost of £50 each. If, however, an order of more than 70 units is placed, the cost of Component 853Q will reduce to £40 each.
urin Ltd has been asked to give a quote for making a large piece of earth-moving equipment. The order will require 80 units of Component 853Q. There are 20 units of this component already held by the business, which cost £45 each. They have a resale value of £30 each. The business uses this component on a regular basis and was about to place an order for 30 more units at a cost of £50 each. If, however, an order of more than 70 units is placed, the cost of Component 853Q will reduce to £40 each.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Turin Ltd has been asked to give a quote for making a large piece of earth-moving equipment. The order will require 80 units of Component 853Q. There are 20 units of this component already held by the business, which cost
£45
each. They have a resale value of
£30
each. The business uses this component on a regular basis and was about to place an order for 30 more units at a cost of
£50
each. If, however, an order of more than 70 units is placed, the cost of Component 853Q will reduce to
£40
each.What is the relevant cost of Component 853Q for the purposes of the quote?
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