Larsen Corporation has designed a new product, J57, whose variable cost is $61.80 per unit and that requires 3.30 minutes of the constrained resource. The opportunity cost is $31.00 per minute used of the constrained resource. What is the minimum acceptable selling price for the new product?
A) $92.80
B) $61.80
C) $102.30
D) $164.10

Question

Quizplus · Accepted Answer

The minimum acceptable selling price should cover both the variable cost and the opportunity cost of using the constrained resource. The opportunity cost is $31.00 per minute, and the product requires 3.30 minutes, so the opportunity cost is 3.30 * $31.00 = $102.30. Adding the variable cost of $61.80 gives a total of $164.10.

Larsen Corporation Has Designed a New Product, J57, Whose Variable