[arpita205]

I would be thankful if you could through some more light on concepts of relevant costing. Actually I am getting confused in a case of min. price is to be quoted for special order, wherein our firm has not reached Break-even point i.e. our normal operations have not covered our fixed cost.

My problem is whether I am suppose to consider unrecovered fixed cost from our special customer.

Some of my friends says that I am supposed to take it some says to ignore it. Please help me out.

[codyman144]

Okay, I need a little clarification here...

Is your normal business a larger production run where you would calculate the breakeven point based on (P-VC)/FC, and now you have a customer that wants a special order of a smaller quantity and your not sure how to handle?

If that is the same I would build in some allowance for fixed costs into your price. But you obviously cannot use the model above for your pricing as much of your fixed costs are already being covered by your other customers or production runs. Also if you were to try to recoup all of your fixed costs on a special order your price would be way too high.

Is that a good summary of the problem you are facing? If not please describe in more detail.