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 $1.50 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 - ($1.50 + $5.00)= $3.50
B)$10.00 - ($2.50 + $5.00)= $2.50
C)$10.00 - ($1.50 + $7.50)= $1.00
D)$10.00 - ($0.50 + $2.50 + $7.00)= 0

Question

Quizplus · Accepted Answer

The formula for operating income per pound is revenue per pound minus total cost per pound. 
In this case, revenue per pound is $10. 
The total cost incurred by Division A is $1.50 per pound, and Division B incurs additional costs of $5.00 per pound. Therefore, the total cost per pound is $6.50. 
Thus, operating income per pound is $10.00 - ($1.50 + $5.00) = $3.50. 
Hence, the correct formula for operating income per pound is option A.

Answer the Following Questions Using the Information Below