Peter Ltd is approached by an agent for an overseas customer seeking to source a large one-time-only special order for a product similar to one offered to regular customers. Peter Ltd has excess capacity and normally produces 50,000 units per year. The one-time order would incur a one-off set-up cost of $7,000.

The following data applies for sales to regular customers:

Direct materials $34.00 per unit

Direct manufacturing labour

Direct labour rate is $35 per hour plus 35% on-costs

0.75 hours is applied per unit of production

Variable manufacturing overhead is $67.90 per unit

Fixed manufacturing overhead is $45 per unit

Fixed marketing overhead $100,000 per year applied on a per unit basis

Fixed design costs $200,000 per year applied on a per unit basis

Mark-up (40%)

Required:

(a) What is the minimum acceptable price of this one-time-only special order?

(b) What price would be offered to long-term customers?