Seattles Top Coffee owns and operates a chain of popular cof

Seattle\'s Top Coffee owns and operates a chain of popular coffee stands that serve over 30 different coffee-based beverages. The constraint at the coffee stands is the amount of time required to fill an order, which can be considerable for the more complex beverages. Sales are often lost because customers leave after seeing a long waiting line to place an order. Careful analysis of the company\'s existing products has revealed that the opportunity cost of order filling time is $4.90 per minute The company is considering introducing a new product, praline cappuccino, to be made with pecan extract and molasses. The variable cost of the standard size praline cappuccino would be $0.53 and the time required to fill an order for the beverage would be 30 seconds Required What is the minimum acceptable selling price for the new praline cappuccino product? (Round your answers to 2 decimal places.) Time required per minute Selling price 2

Solution

Minimum selling price >= variable cost + opportunity cost

SP=$ .53 + $4.9/2 = $2.98

Time required to fill an order = 30 seconds per minute

Cost for this time =$ 4.90/2 = $2.45