A Gel pen (advanced technique) manufacturer makes an average profi t of Rs. 2.80 per piece on a selling price of Rs. 15.10 by producing and selling 50,000 pieces or 50% of the potential capacity. His cost of sales is: (per unit)

During the current year, the manufacturer anticipates that his fi xed charges will increase by 10% and rates of direct material and direct labour will increase by 7% and 9%, respectively. He has no option of increasing the selling price. Under this situation, he obtains an offer of an order equal to 20% of his capacity. This customer is a special customer.
What minimum price will you recommend for acceptance to ensure an overall profi t of Rs. 1,81,000?

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Direct material Rs. 3.80 Direct wages Rs. 1.40 Works overhead Sales overhead Rs. 6.40 (50% fixed) Rs. 0.90 (30% variable)