NSCI is considering a new line of lower-cost kitchen cabinets to target the price- conscious consumer and compete with cheaper imported cabinets. No new machinery or equipment would be required, but the cabinets would be made with cheaper materials and use less labour.

Since NSCI's focus has always been on higher-end, semi-custom cabinets, David is unsure how to price the new line. He would like you to explain the various pricing strategies that could be applied, including the advantages and disadvantages of each. He is interested in your recommendation as to which strategy would be most appropriate for the new line of lower-cost cabinets.

Also, given the following information, he would like to know the minimum price that NSCI should charge for the lower-cost cabinets as well as the price that you would recommend.

Direct labour hours

2.1 per unit

Direct labour rate

$38.50 per hour

Direct materials

$78 per unit

Variable overhead

$23 per unit

Fixed overhead (allocated based on direct labour hours)

$49 per unit

Average selling price of comparable cabinets

$210 per unit