ILLUSTRATION 4 The Managing Director of a small manufacturing concern consults you as to the minimum price at which he can sell the output of one of the departments of the company which is intended for mass production in future. The company's records show the following particulars for this department for the past year for production and sales of 100 units. Materials $14,000 ; Direct Labour $7,000; Works Overheads $7,000; Administration Overheads $2,800 ; Selling Overheads $3,200 ; Profit $6,000. You ascertain that 40% of the works overheads fluctuate directly with production and 70% of the selling overheads fluctuate with sales. It is anticipated that the department would produce 500 units per annum and that direct labour charges per unit will be reduced by 20%, while fixed works overheads will increase by $3,000. Administration overheads and fixed selling overheads are expected to show an increase of 25% but otherwise no changes are anticipated