A sunglasses manufacturer wishes to determine the minimum price it should charge a customer for a special order of sunglasses. The customer has requested a quotation for 100 sunglasses (10 batches) but might subsequently place an order for an additional 100. Material costs are 25 per pair of sunglasses. It is estimated that the first batch of sunglasses will take 80 hours to be completed and a 70% learning curve would apply. Labour and variable overhead costs amount to 2. Setup costs are 800 regardless of the units produced

1. What is the minimum price the company should charge for the initial order if there is no guarantee of further orders (5 marks)
2. If the company was to receive a follow up order, what would the minimum price of this order be (5 marks)
3. What would be the minimum price if both orders were placed together (5 marks)