Use the Following Information for Questions
the Dairy Division

question 103

Multiple Choice

Use the following information for questions
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: $$\begin{array} { l r } \text { Sales } ( 160,000 ) \text { gallons } & \$ 500,000 \\\text { Variable costs } & 312,000 \\\text { Contribution margin } & 188,000 \\\text { Fixed costs } & 100,000 \\\text { Net Income } & \$ 88,000\end{array}$$
-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) $2.50 per gallon.
• B) $1.18 per gallon.
• C) $1.95 per gallon.
• D) $0.55 per gallon.

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Definitions:

Financial Information

Data relating to the financial performance, position, and cash flows of a business, which is used by stakeholders to make economic decisions.

Return on Total Assets

A profitability ratio that measures net income produced by total assets within a period.

Financial Information

Data that pertains to the financial status, performance, and changes in financial condition of an entity.

Days' Sales Uncollected

A measure of how quickly a company converts its accounts receivable into cash, indicating the average number of days sales remain uncollected.