Example 1 - Opportunity Cost A company which manufactures and sells one single product is currently operating at 85% of full capacity, producing 102,000 units per month. The current total monthly costs of production amount to Rs 330,000, of which Rs 75,000 are fixed and are expected to remain unchanged for all levels of activity up to full capacity. A new potential customer has expressed interest in taking regular monthly delivery of 12,000 units at a price of Rs 2.80 per unit. All existing production is sold each month at a price of Rs 3.25 per unit. If the new business is accepted, existing sales are expected to fall by 2 units for every 15 units sold to the new customer. Required: What is the overall increase in monthly profit which would result from accepting the new business? 4. The Relevant Cost Of Materials