The Dairy Division of Famous Foods, Inc - Assume the Yogurt Division Wants to Purchase 30,000 Gallons

Multiple Choice

The Dairy Division of Famous Foods, Inc.produces and sells milk to outside customers.The operation has the capacity to produce 200,000 gallons of milk a year.Last year's operating results were as follows: $$\begin{array} { l r } \text { Sales } ( 160,000 ) \text { gallons } & \$ 500,000 \\\text { Variable costs } & 312,000 \\\text { Contribution margin } & 188,000 \\\text { Fixed costs } & 100,000 \\\text { Net Income } & \$ 88,000\end{array}$$
- Assume the Yogurt Division wants to purchase 30,000 gallons of milk from the Dairy Division.The minimum price that will increase the Dairy Division's profit is

A) $2.50 per gallon.
B) $1.18 per gallon.
C) $1.95 per gallon.
D) $0.55 per gallon.