Janus Corporation Has in Stock 43,700 Kilograms of Material L

Multiple Choice

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?

A) $3.23
B) $5.68
C) $6.92
D) $2.45