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:


Sales (160,000) gallons $500,000
Variable costs 312,000
Contribution margin 188,000
Fixed costs 100,000
Net Income $ 88,000

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) $0.55 per gallon.

b) $1.95 per gallon.

c) $2.50 per gallon.

d) $1.18 per gallon.

b) $1.95 per gallon.

Business

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