The Mixed Nuts Division of Yummy Snacks,Inc

question 154

Multiple Choice

The Mixed Nuts Division of Yummy Snacks,Inc.had the following operating results last year: Yummy expects identical operating results in the division this year.The Mixed Nuts Division has the ability to produce and sell 200,000 pounds of product annually.Assume that the Trail Mix Division of Yummy wants to purchase an additional 20,000 pounds of nuts from the Mixed Nuts Division.Mixed Nuts will be able to increase its profit by accepting any transfer price above:

• A)$0.25 per pound
• B)$0.08 per pound
• C)$0.15 per pound
• D)$0.30 per pound
• E)$0.10 per pound

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Definitions:

Operating Cost

Expenses associated with the day-to-day activities of running a business, excluding costs related to financing and investments.

Useful Life

The period of time over which an asset is expected to be useful in the operations of a business.

Traceable Fixed Expense

A fixed expense that can be directly linked to a specific department, project, or segment of a business.

Net Operating Income

The amount of profit realized from a company's operations after subtracting operating expenses but before interest and taxes.