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:

NaBr

Sodium bromide, a salt with various uses including in medicines, as a sedative, and in photographic processing.

React

To undergo a chemical change or transformation in response to another substance or condition.

Sodium Chloride

The chemical name for table salt, a compound with the formula NaCl, widely used as a condiment and preservative.

Sodium

A soft, silver-white, highly reactive metal belonging to the alkali metal series in the periodic table, denoted by the symbol Na.