Titzer Corporation is about to announce a new product, C02, whose variable cost is $134.80 per unit and that would require 5.90 grams of a raw material that is the constrained resource in the company. The opportunity cost to use this constrained resource is $68.00 per gram. What is the minimum acceptable selling price for the new product?
A)$401.20
B)$134.80
C)$202.80
D)$536.00

Question

Quizplus · Accepted Answer

To determine the minimum acceptable selling price, we need to consider the variable cost per unit and the opportunity cost of using the constrained resource.

Variable cost per unit = $134.80

Opportunity cost per unit (5.90 grams x $68.00 per gram) = $401.20

Minimum acceptable selling price = Variable cost per unit + Opportunity cost per unit 
= $134.80 + $401.20 
= $536

Therefore, the minimum acceptable selling price for the new product is $536. Option D is the correct answer.

Titzer Corporation Is About to Announce a New Product, C02