7. Instructors should have an interesting time discussing this question. We recommend that this question be answered in class by small groups of students (perhaps 4 to 6). Each group should be allowed a short time to discuss the problem and to reach a consensus about the cost estimate. We have found that it is extremely rare for two groups to arrive at the same estimate. We have also found that groups may not be able to agree upon a single estimate.
There is no unique answer to this question because it all depends on the assumptions that one makes about the cost conditions. However, based on the strict criteria of relevant cost (i.e. incremental or variable cost), we suggest that the following estimate: