The cost per unit of making and selling an item at a volume of 9,100 units per month (which represents the company's capacity): Manufacturing: Direct materials $1.90 Direct labor $2.90 Variable overhead $1.40 Fixed overhead $0.30 Selling and administrative: Variable $2.90 Fixed $0.70 Present sales amount to 7,200 units per month. An order has been received from a customer in a foreign market for 1,900 units. The order would not affect current sales. Fixed costs, both manufacturing and selling and administrative, are constant within the relevant range between 8,000 and 10,000 units per month. The variable selling and administrative costs would have to be incurred for this special order as well as all other sales. Assume direct labor is a variable cost.

Assume the company has 95 units left over from last year which have small defects and which will have to be sold at a reduced price for scrap. The sale of these defective units will have no effect on the company's other sales. Which of the following costs is relevant in this decision?

1. $6.20 Variable manufacturing cost

2. $6.50 unit product cost

3. $2.90 variable selling and administrative cost

4. 10.10 full cost