Reference no: EM132497350

A garage (MyCar) has an old car that it bought several months ago for £3,000. The car needs a replacement engine before it can be sold. It is possible to buy a reconditioned engine for £300. This would take seven hours to fit by a mechanic who is paid £8 an hour. At present the garage is short of work, but the owners are reluctant to lay off any mechanics or even to cut down their basic working week because skilled labour is difficult to find and an upturn in repair work is expected soon. Without the engine, the car could be sold for an estimated £3,500.

Problem 1: What is the minimum price at which the garage should sell the car, with a reconditioned engine fitted? Assume exactly the same circumstances as previously, except that the garage is quite busy at the moment. If a mechanic is to be put on the engine replacement job, it will mean that other work that the mechanic could have done during the seven hours, all of which could be charged to a customer, will not be undertaken. The garage's labour charge is £20 an hour, though the mechanic is only paid £8 an hour.

Problem 2: What is the minimum price at which the garage should sell the car, with a reconditioned engine fitted, under these altered circumstances?

Problem 3: Apart from whether the car could be sold for more than the relevant cost of doing this, are there any other factors that should be taken into account in making a decision as to whether or not to do the work?