Snowhite Ltd makes readymade shirts (of one male size). Revenue and cost data relating to the coming years are given below: The firm has a capacity to make 10,000 shirts per year. The fixed costs...

Snowhite Ltd makes readymade shirts (of one male size). Revenue and cost data relating to the coming years are given below:

The firm has a capacity to make 10,000 shirts per year. The fixed costs included in the cost of goods sold are `10,00,000. The only variable selling, general and administrative expenses are: 4 per cent sales commission, and `20 per shirt paid to the designer. A chain store manager has approached the sales manager of Snowhite Ltd offering to by 1,000 shirts at `700 per shirt. The sales manager believes that accepting this offer would result in a loss because the average cost of a shirt is higher than `700. He feels that a loss would still result, even if sales commission would not be paid on the sales order. The designer has agreed to waive 50 per cent of his fee on any number of shirts sold to such a store. (i) Tender you advice to the sales manager of Snowhite Ltd. (ii) Suppose that the order was for 2,500 instead of 1,000 shirts, what would be your advice? (iii) Assuming the same facts as in part (ii), what is the lowest price that the firm would accept and still earn `11,00,000?