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Noel Stewart Bought a Machine Two Years Ago for £500

question 65

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.
-In this decision, Noel would consider the sunk cost to be:

Definitions:

Trend Percentages

An analytical tool used to examine changes in financial statements items over various periods, expressing each item as a percentage of its value in the base year.

Base Period

A specific time period used as a standard of comparison for financial or economic data.

Analysis Period

The specific span of time for which financial or operational performance is examined and analyzed.

Comparative Statements

Comparative statements are financial statements that provide data for multiple periods side by side, allowing for easy comparison and analysis of performance over time.