EXERCISE B–3 Pricing a New Product [LO3]
Java Stop 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 $3.40 per minute.
The company is considering introducing a new product, amaretto cappuccino, to be made with almond extract and double-fine sugar. The variable cost of the standard size amaretto cappuc- cino would be $0.46 and the time required to fill an order for the beverage would be 45 seconds.
What is the minimum acceptable selling price for the new amaretto cappuccino product?
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