The management of Claypole Corporation has provided the following data concernin
ID: 2472626 • Letter: T
Question
The management of Claypole Corporation has provided the following data concerning its two products—H59 and C92:
H59
C92
Selling price
$45.00
$60.00
Unit variable cost
$36.00
$54.00
Monthly demand (units)
1,430
2,680
The constrained resource is a particular machine that is available for 10,100 minutes each month. Each unit of product H59 requires 5 minutes on this machine. Each unit of product C92 requires 3 minutes on this machine.
The company is considering launching a new product that would have a variable cost of $88.00 per unit. It would require 11 minutes of the constrained resource. The absolute minimum acceptable selling price for the new product should be:
89.90
107.80
110
88
H59
C92
Selling price
$45.00
$60.00
Unit variable cost
$36.00
$54.00
Monthly demand (units)
1,430
2,680
Explanation / Answer
H59 C92 Seliing Price 45 60 Variable Cost 36 54 Contribution per unit 9 6 Machine minutes require per unit 5 3 Contribuion per machine minute 1.8 2 preferrence II I So new prodcut price should be Variable Cost+C92 Contribution per minute*minutes require per unit = 88+2*11 = 110 Then minimum price should be 110
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.