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

question 3

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 80 percent of capacity. The Air Division currently buys the gravel for $55 per ton from an outside source. How much is the lowest transfer price the Rail Division should accept to maintain current profitability?

• A) $55
• B) $32
• C) $62
• D) $30

---

Definitions:

Fluid Intelligence

The ability to reason and think flexibly, solving problems in novel situations, without drawing on pre-existing knowledge.

Word Game

A puzzle or game designed to test knowledge of words, their meanings, and usage, often used for entertainment or educational purposes.

Triarchic Theory of Intelligence

A theory proposed by Robert Sternberg that posits intelligence consists of three components: analytical, creative, and practical intelligence.

Analytical Intelligence

One aspect of Robert Sternberg's triarchic theory of intelligence, involving the ability to analyze, evaluate, judge, compare, and contrast.