Special Order

Pulse Cycles rejected this price and offered to purchase the $600$ scooters at a price of $$54,000.$

The following additional information is available:

Razor has sufficient excess capacity to produce the scooters.

Factory overhead is applied on the basis of direct labor dollars.

Selling and administrative expenses are budgeted as follows:

Fixed: $$3,600,000$ per year

Variable: $$10$ per unit manufactured and sold

Required

Note: Do not use negative signs with your answer.

a$.$ The president of Razor wants to know if he should allow Pulse Cycles to have the scooters for $$54,000.$ Determine the effect on profits of accepting Pulse Cycles' offer.

Increase of $$$

b$.$ Assume Razor is operating at capacity and could sell the $600$ scooters at its regular markup.

Determine the opportunity cost of accepting Pulse Cycles' offer. $$0$

Determine the effect on profits of accepting Pulse Cycles' offer.