Problem:
GS is currently making 500 tiger covers a week at a per unit cost of 3.50 euros which includes both variable costs and allocated fixed cost. GS sell the tiger covers to distributors for 4.25 euros. A distributors in japan wants to purchase 100 tiger covers per week from GS. GS 2 euros per head cover. GS the capability to produce the additional 100 tiger head covers and estimates that the per unit cost of all 600 covers will 3.10 euros. Assume the cost data provided (3.50-3.10 euros are accurate estimates of GS's cost of producing the tiger covers. Further assume that the GS's variable cost per cover does not vary with the number of head cover manufactured.