Noel Stewart Bought a Machine Two Years Ago for £500

question 14

Multiple Choice

Noel Stewart bought a machine two years ago for £500. He must now replace the old machine by buying a new model 206 for £700 or a used model 204 for £650. Noel has decided to buy model 204.
Noel Stewart has estimated that the total fixed costs for his department are £10,000. He also estimated that his variable cost per unit is £10.
Noel Stewart bought some materials 2 years ago for £300. These materials have simply been left in stock as they were not needed. A new customer offers to buy a product that uses these materials. The conversion cost is £500 and the customer has offered to pay £650 for the product. Noel decides to accept the order.
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If Noel produced 100 units his total cost would be:

• A)£10,010.
• B)£11,000.
• C)£11,100.
• D)£1,000.

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Definitions:

Conscience

An inner feeling or voice acting as a guide to rightness or wrongness of one's behavior.

Sincerely

A form of sign-off in correspondence that indicates genuineness and goodwill.

Spelling

The act of correctly sequencing the letters that form a word when writing or naming them.

Permitted

Allowed or authorized by law or by some authority.