What is the minimum price at which the company should sell the machine with the necessary part fitted?
Understand the Problem
The question is asking what the minimum price should be for a company to sell a machine after fitting a part, which includes the cost of the part and the labor cost of fitting it. We need to calculate these costs and sum them to find the total minimum price.
Answer
The minimum price should be £834.
Answer for screen readers
The minimum price for the machine after fitting the part should be £834.
Steps to Solve
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Identify costs involved The costs we need to consider for the minimum price include the cost of the part and the labor cost associated with fitting the part.
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Calculate the labor cost To find out the labor cost, multiply the engineer's charge-out rate per hour by the number of hours worked.
The engineer's charge-out rate is ( £22 ) per hour, and the job takes ( 8 ) hours: $$ \text{Labor cost} = 22 \times 8 = 176 $$
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Sum all costs to find the minimum price Now, add the cost of the part and the labor cost:
With the cost of the part being ( £658 ) and the calculated labor cost being ( £176 ): $$ \text{Minimum price} = \text{Cost of the part} + \text{Labor cost} $$ $$ \text{Minimum price} = 658 + 176 = 834 $$
The minimum price for the machine after fitting the part should be £834.
More Information
This calculation shows the importance of including all associated costs when determining the selling price of a product. The company must cover the cost of parts and labor to ensure profitability.
Tips
- Forgetting to include both the cost of the part and the labor costs when calculating the total.
- Miscalculating the labor cost by not properly multiplying the hourly rate by the number of hours.
- Not reviewing whether all costs are accounted for.
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