Whelchel Products Inc

question 2

Multiple Choice

Whelchel Products Inc.makes two products-K12C and R25O.Product K12C's selling price is $56.00 and its unit variable cost is $33.60.Product R25O's selling price is $195.00 and its unit variable cost is $156.00.The monthly demand is 980 units for product K12C and 500 units for R25O.The constrained resource is a particular machine that is available for 10, 100 minutes each month.Each unit of product K12C requires 7 minutes on this machine and each unit of product R25O requires 15 minutes on this machine. The company is considering launching a new product that would have a variable cost of $134.00 per unit and no avoidable fixed costs.It would require 16 minutes of the constrained resource.The absolute minimum acceptable selling price for the new product should be:

• A)$175.60
• B)$185.20
• C)$136.60
• D)$134.00

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Definitions:

Insurable Interest

A principle that requires an individual to have a stake in the safety or preservation of the insured object against loss or damage.

Financial Benefit

An economic advantage or gain received, such as income, dividends, or appreciation in asset value.

Fair Market Value

Fair market value is the price at which a willing buyer and a willing seller, both having reasonable knowledge of the relevant facts, would engage in a transaction.

Moral Hazard

The possibility that individuals who are insulated from risk sometimes behave differently than they would if not insulated.