Gastineau Corporation\'s two products have the following characteristics: The co
ID: 2486050 • Letter: G
Question
Gastineau Corporation's two products have the following characteristics:
The constrained resource is a particular machine that is available for 9,600 minutes each month. Each unit of product J45Z requires 19 minutes on this machine and each unit of product W47E requires 7 minutes on this machine.
The company is considering launching a new product that would have a variable cost of $168.00 per unit and no avoidable fixed costs. It would require 9 minutes of the constrained resource. The absolute minimum acceptable selling price for the new product should be:
$168.00
$171.00
$211.20
$195.00
J45 Selling price $285.00 $168.00 Unit variable cost $228.00 $134.40 Monthly demand (units) 390 910Explanation / Answer
J45 W47E Selling price 285 168 Less : unit variable cost 228 134 Contribution per unit 57 34 Machine mins required per unit 19.00 7.00 Contribution per min 3.00 4.86 Number of units 390.00 910.00 Weighted contribution 57.00 34.00 total contribution 91.00 Contribution per unit 0.07 new product Unit variable cost 168 Contribution required 0.07 minimum selling price 168.07 Hence 1st option is correct
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