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What is the minimum price that Dursley Ltd could charge the cosmetics business to justify the additional research? (ignore the time value of money.) A. £90,000 B. £135,000 ⒸC. £105,000 D. £205,000

What is the minimum price that Dursley Ltd could charge the cosmetics business to justify the additional research? (ignore the time value of money.) A. £90,000 B. £135,000 ⒸC. £105,000 D. £205,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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QUESTION 8 Dursley Ltd is a research business that has invested £70,000 to date in developing a new type of cream to arrest the effects of ageing on the skin. The research has not been entirely successful as there has been no interest in the new cream from healthcare businesses. Recently, however, a cosmetics business has made enquiries about the cream and its potential as a sun blocker Dursley Ltd believes that there is such potential for the cream; however, further research would have to be carried out. The business would have to extend the research contracts of two research chemists for a further year at a total cost of £80,000. The research chemists are due to be made redundant at a total cost of £30,000. However, if the contract is extended the total redundancy cost will be £40,000 at the end of the contract. The further research that will have to be carried out will take up one quarter of the laboratory space available within the business. The business rents the laboratory at an annual cost of £60,000 per year. What is the minimum price that Dursley Ltd could charge the cosmetics business to justify the additional research? (Ignore the time value of money.) A. £90,000 B. £135,000 ⒸC. £105,000 D. £205,000
Transcribed Image Text:QUESTION 8 Dursley Ltd is a research business that has invested £70,000 to date in developing a new type of cream to arrest the effects of ageing on the skin. The research has not been entirely successful as there has been no interest in the new cream from healthcare businesses. Recently, however, a cosmetics business has made enquiries about the cream and its potential as a sun blocker Dursley Ltd believes that there is such potential for the cream; however, further research would have to be carried out. The business would have to extend the research contracts of two research chemists for a further year at a total cost of £80,000. The research chemists are due to be made redundant at a total cost of £30,000. However, if the contract is extended the total redundancy cost will be £40,000 at the end of the contract. The further research that will have to be carried out will take up one quarter of the laboratory space available within the business. The business rents the laboratory at an annual cost of £60,000 per year. What is the minimum price that Dursley Ltd could charge the cosmetics business to justify the additional research? (Ignore the time value of money.) A. £90,000 B. £135,000 ⒸC. £105,000 D. £205,000
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