Janus Corporation has in stock 43,700 kilograms of material L


Question Description:

24.99

Janus Corporation has in stock 43,700 kilograms of material L that it bought five years ago for $6.10 per kilogram. This raw material was purchased to use in a product line that has been discontinued. Material L can be sold as is for scrap for $3.23 per kilogram. An alternative would be to use material L in one of the company’s current products, E99D, which currently requires 2 kilograms of a raw material that is available for $9.45 per kilogram. Material L can be modified at a cost of $0.62 per kilogram so that it can be used as a substitute for this material in the production of product E99D. However, after modification, 3 kilograms of material L is required for every unit of product E99D that is produced. Janus Corporation has now received a request from a company that could use material L in its production process. Assuming that Janus Corporation could use all of its stock of material L to make product E99D or the company could sell all of its stock of the material at the current scrap price of $3.23 per kilogram, what is the minimum acceptable selling price of material L to the company that could use material L in its own production process?

Answer

24.99