XYZ Company produces lawn furniture. The cost per lawn chair is computed as follows:

Direct Labor $2.25
Materials $2.30
Plant overhead $1.15
Administrative and selling expense    $0.80
Total $6.50 per unit

These costs are allocated to each unit of output bases on projected annual production of 500,000 chairs.

Company added $0.65 mark-up to price to arrive at selling price of $7.15 per unit

Company XY needs to purchase 30,000 chairs at $5.50 each.

1) Compute the marginal cost per chair to XYZ of accepting the chair order from XY?

2) prepare down the assumptions that were made in computing the marginal cost?