Agra Limited has been asked to quote a price for a special contract. The details are as follows:

1. The specification required a quotation for 100,000 units.

2. The direct costs per unit for the order would be: materials £3, labour £15, distribution £12.

3. Additional production and non-production overhead would amount to £500,000, although £100,000 could be saved if the order was for less than 100,000 units.

4. Agra’s normal profit margin is 20 per cent of total cost.

Required:

Recommend a minimum selling price if the order was for:

(a) 100,000 units

(b) 80,000 units.