Response to the following problem:
Agra Limited has been asked to quote a price for a special contract. The details are as follows:
1. The specification required a quotation for 100,000 units.
2. The direct costs per unit for the order would be: materials £3, labour £15, distribution £12.
3. Additional production and non-production overhead would amount to £500,000, although £100,000 could be saved if the order was for less than 100,000 units.
4. Agra's normal profit margin is 20 per cent of total cost.
Required:
Recommend a minimum selling price if the order was for:
(a) 100,000 units
(b) 80,000 units.