From the above information, the Managing Director has suggested that the company discontinues product T. This does mean there will be spare capacity in the factory but the MD suggests there is no point in using resources to make a product which is making a loss. However, the company has been approached by a local school which is interested in Rolex producing a special one-off order for them but would like the price to be kept as low as possible. The company could undertake the order if it stopped producing product T. The new order would need the existing direct labor used for product T and would also use 60,000 of direct materials. The order could be produced on the existing machines in the factory, apart from one special machine that would need to be hired costing 20,000. There would be no selling costs incurred.

Re-draft the above information to provide a more useful statement and consider the various options available to Rolex plc.

You should include a calculation of the minimum price at which the new order could be sold to the local school.