PROBLEM 6-3. ALLOCATED COST AND OPPORTUNITY COST [LO 1]

Binder Manufacturing produces small electric motors used by appliance manufacturing. In the past years, the company has experienced severe excess capacity due to competition from a foreign company that has entered Binders market. The company is currently bidding on a potential order from Dacon Appliances for 6,000 Model 350 motors. The estimated cost of each motor is $45, as follows:

Direct Material	$25
Direct labor	$5
Manufacturing Overhead	15
Total	45

The predetermined overhead rate is $3 per direct labor dollar. This was estimated by dividing estimated annual overhead ($15,000,000) by estimated annual direct labor ($5,000,000). The $15,000,000 Overhead is composed of $6,000,000 of variable costs and $9,000,000 of fixed costs. The largest fixed cost relates to depreciation of plant and equipment.

1. With respect to overhead, what is the opportunity cost of producing a Model 350 per motor?