Question

#8. Allied Laboratories is combing some of its most common tests into one-price packages. One such package will contain three tests that have the following variable costs:

	Test A	Test B	Test C
Disposable Syringe	$3.00	$3.00	$3.00
Blood Vial	$0.50	$0.50	$0.50
Forms	$0.15	$0.15	$0.15
Reagents	$0.80	$0.60	$1.20
Sterile Bandages	$0.10	$0.10	$0.10
Breakage/losses	$0.05	$0.05	$0.05

When the tests are combined, only one syringe, form, and sterile bandage will be used. Furthermore, only one charge for breakage/losses will apply. Two blood vials are required, and reagent costs will remain the same (reagents from all three tests are required).

What price must be charge to achieve a contribution margin of $10?

Choice: $10.25

Choice: $15.70

Choice: $16.90

Choice: $19.80

Answer 1

Price = variable cost + Required contribution margin

variable cost = disposable syringe + blood vial + forms + riagent+ bandages +breakage

= 3 + (2*0.5) + 0.15 +(0.8 + 0.6 + 1.2) + 0.1 + 0.05 = $6.9

Required contribution margin = $10

Hence, Price = $6.9 + $10 = $16.90

$16.90 is correct answer.