A. The answer $100 is calculated by the use of the full cost ($90 per unit) plus the opportunity cost of $10 per unit to calculate the minimum acceptable price ($90 full cost of KB-96 + $10 opportunity cost). The answer should include only incremental cost plus the opportunity cost.

B. This answer is including fixed selling and administrative cost which are unavoidable and should not be included.

C. If the company is operating at full capacity, then in order to produce the special order the company will lose $10,000 of potential contribution, or $10 per unit ($10,000 lost contribution ÷ 1,000 units in the special order). This lost opportunity has to be reflected in the price that will be charged for the special order, which will be $20 DM + $15 DL + $12 VOH + $3 shipping and handling + $10 opportunity cost, for a total of $60. $60 is the minimum price that is acceptable.

D. An answer of $87 includes fixed manufacturing, but does not include shipping and handling.