B. The company is able to charge 125% of the full cost for the order. The full cost will include $100,000 of fixed costs and $240,000 of materials costs. In addition, there will be labor costs, However, we need to determine what those labor costs will be.

We can calculate that the learning curve is 80%. The first 10 units produced cost $120,000 in labor. If no learning had taken place, the first 20 units would have cost $240,000 in labor. However, the labor cost for the first 20 units was $192,000. By dividing $192,000 by $240,000, we calculate that the learning curve is 80%.

We know that labor costs are $307,200 to produce the first 40 units. However, the company experiences an 80% learning curve, which means that the labor cost to produce the next 40 units will not be $307,200, but $184,320. This is calculated as follows: The first 40 units cost $307,200 to produce. If no learning had taken place, it would cost twice that amount, or $614,400 to produce the first 80 units (the first 40 units plus another 40 units). However, as there is a learning curve of 80%, the total cost for the 80 units will be 80% of that $614,400 expected amount, or $491,520. Since the first set of 40 units cost $307,200, the incremental cost of producing the second set of 40 units was only $491,520 - $307,200, which equals $184,320. Variable overhead will also be charged at $1 per direct labor dollar, or $184,320. Therefore, the total costs of production are $708,640 ($100,000 + $240,000 + $184,320 + $184,320). Adding 25% to this, we get $885,800.

C. This answer does not include the $100,000 of fixed costs. See the correct answer for a complete explanation.

D. This answer does not include the $100,000 of fixed costs or the 25% markup. See the correct answer for a complete explanation.