Question

"Ogilvy Theatre Productions Ltd has been asked to give a quote for making stage clothes for a new musical production. The order will require 140 metres of material NT1. There are 50 metres of this material already​ held, which costs £18 per metre. The material has a resale value of £20 per metre. The business uses this material on a regular basis and was about to place an order for 40 more metres at a cost of £25 per metre.​ If, however, an order for more than 60 metres is​ placed, the cost of the material will be reduced to £22 per metre."

What is the relevant cost of material NT1 for the purpose of the​ quote?
a) £1,800
b) £2,000
c) £2,200
d) £2,400

Answer 1

The relevant cost of material NT1 for quoting the stage clothes is the sum of the marginal costs for the additional material needed above what is already on hand. This includes the 40 meters at £25 per meter and the 50 meters at the discounted rate of £22 per meter, totaling £2100, which does not match any of the provided options.

Step-by-step explanation:

The relevant cost of material NT1 for the purpose of the quote for Ogilvy Theatre Productions Ltd should reflect the marginal cost of obtaining the material necessary to complete the order for a new musical production, above and beyond what they already hold or were about to purchase for regular use. Since the company already has 50 metres at a cost of £18 per meter (which could be resold for £20 per meter), and they were going to buy 40 meters at £25 per meter, the remainder needs to be bought at the discounted rate. The cost breakdown is as such:

• There is no cost for the initial 50 meters since it can be resold for more than the cost.
• The next 40 meters would cost £25 per meter, amounting to £1000.
• For the remaining 50 meters (140 required minus 90 accounted for), since the order is for more than 60 meters in total, the cost would be £22 per meter, which is £1100.
• Adding these two costs gives us a relevant cost of £2100 (£1000+£1100), which is not an answer choice provided.

It appears there may be an error in the question or answer choices given, as the correct relevant cost calculated doesn't match any given options. For quoting purposes, it is essential to use the correct figure calculated, which is £2100.