Young Orchids Ltd (YOL) is a shoe manufacturing company that started business two years back. Their target group of customers are kids below the age of five. Its production capacity is 6,500 pairs of...

Young Orchids Ltd (YOL) is a shoe manufacturing company that started business two years back. Their target group of customers are kids below the age of five. Its production capacity is 6,500 pairs of shoes per month and there is inventory of 200 pairs of shoes on hand. Expected sales at regular prices for the coming month are 6,000 pairs of shoes. Price and cost data per unit are as follows:

The OYL has received an order from a store to buy 1,000 pairs at `350 each. The variable selling costs on the special order would be `10 per unit. The delivery is to be made within 30 days. (i) Should young Orchids go for the offer or reject it straight away? (ii) What should be the lowest price that the YOL should charge on the special order and not reduce its income? (iii) Suppose now that the shopkeeper offers to buy 800 pairs per month at `350 per pair. The offer would be for an entire year. Expected sales are 6,000 pairs per month without accepting the special order. Assuming further that there is no beginning inventory, determine whether the offer should be accepted by YOL.