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 Milk Chocolate Division is currently operating at its capacity of 200,000 pounds of chocolate.Also assume again that the Peanut Butter Division wants to purchase an additional 20,000 pounds of chocolate from Milk Chocolate.Under these conditions,what amount per pound of chocolate would Milk Chocolate have to charge Peanut Butter in order to maintain its current profit?
A)$0.40 per pound
B)$0.08 per pound
C)$0.15 per pound
D)$0.25 per pound

Question

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 Milk Chocolate Division is currently operating at its capacity of 200,000 pounds of chocolate.Also assume again that the Peanut Butter Division wants to purchase an additional 20,000 pounds of chocolate from Milk Chocolate.Under these conditions,what amount per pound of chocolate would Milk Chocolate have to charge Peanut Butter in order to maintain its current profit?
A)$0.40 per pound 
B)$0.08 per pound 
C)$0.15 per pound 
D)$0.25 per pound

Quizplus · Accepted Answer

Since the Milk Chocolate Division is already operating at capacity,it would have to charge the Peanut Butter Division its current selling price on the outside market of $0.40 per pound to maintain its current profit.