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Hi john,Bronty co is considering whether to undertake some contract work for a customer. A special cutting machine will have to be hired for three months for the work(the length of the contract). Hire charges for this machine are $75 per month, with a minimum hire charge of $300.
my question is why only $300 minimum hire charge is relevant in the answer (BPP Study Kit.)
Thanks‘Minimum hire charge’ means that this is the smallest that they will have to pay.
If they were hiring for 12 months, then they would have to pay 12 x 75 = $900
If there was no minimum charge then for 3 months they would pay 3 x 75 = $225.
However, the minimum charge means that they will always have to pay at least $300.So since they are hiring for 3 months they will be charged $300 (and not $225).
thanks for the prompt response, I took the minimum charge before as a fixed charge in addition to normal monthly charge. my doubt is now cleared. thanks
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