Nations Corporation has designed a new product, K48, whose variable cost is $56.70 per unit and that requires 3.10 minutes of the constrained resource. The opportunity cost is $39.00 per minute used of the constrained resource. What is the minimum acceptable selling price for the new product?
A)$177.60
B)$95.70
C)$56.70
D)$120.90

Question

Quizplus · Accepted Answer

To calculate the minimum acceptable selling price, we need to use the following formula:
Minimum Selling Price = Variable Cost per Unit + (Opportunity Cost per Minute / Units per Minute of Constrained Resource)

Units per Minute of Constrained Resource = 1 / 3.10 = 0.3226

Now, we can plug in the values:
Minimum Selling Price = $56.70 + ($39.00 / 0.3226) = $177.60

Therefore, the minimum acceptable selling price for the new product is $177.60. The best choice is A.

Nations Corporation Has Designed a New Product, K48, Whose Variable