RedEx Transport's Rail Division Has an Annual Capacity to Process

question 139

Multiple Choice

RedEx Transport's Rail Division has an annual capacity to process 800,000 tons of gravel used as a base under railroad tracks by railroads. The normal selling price is $62 per ton. At current operating levels, fixed costs are $10 per ton and variable costs are $32 per ton. The Air Division of RedEx Transport would like to buy 200,000 tons of gravel from the Rail Division to use in producing quality aggregate to be used for runways. The Rail Division is operating at 100 percent of capacity. The Air Division currently buys the gravel for $55 per ton from an outside source. The Rail Division can save $5 per ton in variable costs on the transfer. What is the lowest price the Rail Division should consider if it wishes to see no decline in profits?

• A) $62.00
• B) $27.00
• C) $57.00
• D) $67.00

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Definitions:

Gluc/o

A word root used in the medical field to refer to sugar, particularly glucose, which is a primary source of energy for the body's cells.

Parathyroid Glands

Small endocrine glands located in the neck behind the thyroid, which regulate calcium levels in the blood and bone metabolism.

Thyroid Gland

An endocrine gland in the neck that produces hormones regulating the body's metabolic rate, heart and digestive function, muscle control, brain development, and bone maintenance.

Poison

A substance that is capable of causing illness or death when introduced into the body.