Answer the following questions using the information below:
Division A sells ground veal internally to Division B, which in turn, produces veal burgers that sell for $10 per pound. Division A incurs costs of $1.25 per pound while Division B incurs additional costs of $5.00 per pound.
-Which of the following formulas correctly reflects the company's operating income per pound?
A) $10.00 - ($1.25 + $5.00) = $3.75
B) $10.00 - ($2.50 + $5.00) = $2.50
C) $10.00 - ($1.25 + $7.50) = $1.25
D) $10.00 - ($0.50 + $2.50 + $7.00) = 0

Question

Quizplus · Accepted Answer

Operating income is revenue minus total costs. In this case, the revenue is $10.00 per pound, and the total costs are the costs incurred by Division A ($1.25 per pound) plus the additional costs incurred by Division B ($5.00 per pound). Therefore, the correct formula is $10.00 - ($1.25 + $5.00) = $3.75 per pound.

Answer the Following Questions Using the Information Below