The Northshire Hospital Trust operates two types of specialist X-ray scanning machine, XR1 and XR50. Details for the next period are estimated as follows:

A brain scan is normally carried out on machine type XR1: this task uses special X-ray plates costing £40 each and takes four hours of machine time. Because of the nature of the process, around 10 per cent of the scans produce blurred and therefore useless results.

Required:
(a) Calculate the cost of a satisfactory brain scan on machine type XR1.
(b) Brain scans can also be done on machine type XR50 and would take only 1.8 hours per scan with a reduced reject rate of 6 per cent. However, the cost of the X-ray plates would be £55 per scan.

Advise which type should be used, assuming sufficient capacity is available on both types of machine.

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(£) (£) Sales 115000 Less Value-added tax (VAT) 15000 Sales less VAT 100000 50000 Cost of goods sold Wages and wage related costs Rent including down payment Rates, heating, lighting and insurance Audit, legal and general expenses 12000 10000 13000 2000 87 000 Net profit before tax 13000