Hello, I asked for help with a homework question and got an answer but I wanted to confirm this is correct.

Here's what the explanation says:

"when operating at capacity minimum price = current price of the unmodified product plus additional variable cost of modification

=130+15+.2*20= 149"

Could you please confirm that the selling price should be used and not the contribution margin per unit in this calculation? If so, why is that?

Here's the original problem:

selling price of product is $130

direct materials are $40

direct labor is $30

fixed cost is $15

Direct labor is paid $20/hr and each unit of the product requires 1.5 labor hours. Fixed manufacturing overhead is applied to products at the rate of $10 per direct labor hour.

Manufacturing company got an offer from a new customer to buy a modified version of the existing product. Modification would require additional $15 of direct materials cost and additional .20 labor hours. If the company is at capacity and would need to displace some of its existing product to accept this offer, what is the minimum price they should accept for the first unit of this modified product?

Thank you.