The Milk Chocolate Division of Mmmm Foods,Inc

Multiple Choice

The Milk Chocolate Division of Mmmm Foods,Inc.had the following operating results last year: Milk Chocolate expects identical operating results this year.The Milk Chocolate Division has the ability to produce and sell 200,000 pounds of chocolate annually.Assume that the Peanut Butter Division of Mmmm Foods wants to purchase an additional 20,000 pounds of chocolate from the Milk Chocolate Division.Milk Chocolate will be able to increase its profit by accepting any transfer price above:

A) $0.40 per pound
B) $0.08 per pound
C) $0.15 per pound
D) $0.25 per pound
E) $0.10 per pound