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Special order pricing - Shorewood Shoes Company makes and sells a variety of leather shoes for children. For its current mix of different models and seizes, the average selling price and costs per pair of shoes are as follows:Item AmountPrice $20Costs:Direct materials $6Direct labor $4Variable manufacturing overhead $2Variable selling costs $1Fixed overhead $3Total Costs $16Shoes are manufacture in batch sizes of 100 pairs. Each bath required 5 machine hours to manufacture. The plant has a total capacity of 4,000 machine hours per month, but current monthly production consumes only about 80% of the capacity.A discount store has approached Shorewood to buy 10,000 pairs of shoes next month. It has requested that the shoes bear its own private label. Embossing the private label will cost Shorewood an additional $0.50 per pair. However, no variable selling costs will be incurred for fulfilling this special order.Determine the minimum (floor) price that Shorewood Shoes should charge for this order. What other considerations are relevant in this decision?
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