Gorey Products Inc

question 2

Multiple Choice

Gorey Products Inc. makes two products—K36L and W81H. Product K36L's selling price is $345.00 and its unit variable cost is $310.50. Product W81H's selling price is $256.00 and its unit variable cost is $230.40. The monthly demand is 430 units for product K36L and 890 units for W81H. The constrained resource is a particular machine that is available for 10,000 minutes each month. Each unit of product K36L requires 15 minutes on this machine and each unit of product W81H requires 8 minutes on this machine.
-The company is considering launching a new product that would have a variable cost of $158.00 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:

• A)$178.70
• B)$158.00
• C)$160.30
• D)$186.80

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Definitions:

Collection Float

The time period between when a payment is initiated by a payer and when the funds are available in the payee’s account.

Opportunity Costs

The benefit that is missed or foregone when choosing one alternative over another.

Trading Costs

Expenses associated with buying and selling securities, including broker commissions and spreads.

Speculative Motive

This motive describes the intention to hold cash for the purpose of taking advantage of opportunities that may arise, such as purchasing assets expected to increase in value.