Power trampoline produces fitness trampolines. An upcoming fitness brand bounce it out has just asked power trampoline for a quote to purchase 300 trampolines for use in its facilities. Power trampoline provided the following quote to Bounce it Out:

Manufacturing Costs:

Direct materials $11,850

Direct labor $8500

Manufacturing Overhead 15,800

Total cost $36,150

Markup (per policy) 60%

Total Estimated price $57,840

Bounce it out counter offered for $45000 for the 300 trampolines. Should Power trampoline accept this offer?

They provide the following information to help the decision:

-they have excess capacity and could manufacture the 300 trampolines without impacting their other manufacturing needs.

-manufacturing overhead is allocated based on direct labor hours

-budgeted manufacturing over is 8,000,000 for the current year. Of this amount $6,000,000 is fixed. Of the $15,800 of manufacturing overhead shown on the bounce it out quote only $3950 is driven by the special order; $11,850 is fixed cost.

-fixed selling and admin costs are estimated to be $3,000,000

-variable selling and admin costs are estimated to be $10 per unit sold/manufactured

(a) by how much would Power trampoline profit change if they accept Bounce It out counter offer?

(b) now assume that power trampoline is actually operating at capacity and they have no excess, thus they could sell all 300 trampolines at its unusual markup to the market. What is the opportunity cost of accepting Bounce It Outs counter offer?