=+8-32 KK Opportunity costs (H. Schaefer) OBJECTIVE 4 Wolverine Ltd is working at full production capacity producing 13000 units of a unique product, Rosebo. Manufacturing cost per unit for Rosebo is as follows:

Direct materials $5 Direct manufacturing labour 1 Manufacturing overhead 7 Total manufacturing cost $13 Manufacturing overhead cost per unit is based on variable cost per unit of $4 and fixed costs of $39000 (at full capacity of 13000 units). Marketing cost per unit, all variable, is $2, and the selling price is $26.

A customer, Rainbows Ltd, has asked Wolverine Ltd to produce 3500 units of Orangebo, a modification of Rosebo. Orangebo would require the same manufacturing processes as Rosebo. Rainbows Ltd has offered to pay Wolverine Ltd $20 for a unit of Orangebo, and accepting this offer will reduce the marketing cost to $1 per unit.

Required 1 What is the opportunity cost to Wolverine Ltd of producing the 3500 units of Orangebo? (Assume that no overtime is worked.)