The Tire Division of Traker Company Produces Tires for Off-Road

question 39

Multiple Choice

The Tire Division of Traker Company produces tires for off-road sport vehicles.One-third of Tire's output is sold to an internal division of Traker;the remainder is sold to outside customers.Tire's estimated operating profit for the year is:
$$\begin{array} { | l | r | r | } \hline & \text { Intemal } & \text { Outside } \\\hline \text { Sales } & \$ 150,000 & \$ 400,000 \\\hline \text { Variable costs } & 100,000 & 200,000 \\\hline \text { Fixed costs } & 30,000 & 60,000 \\\hline \text { Operating profits } & \$ 20,000 & \$ 140,000 \\\hline \text { Unit sales } & 10,000 & 20,000 \\\hline\end{array}$$
The internal division has an opportunity to purchase 10,000 tires of the same quality from an outside supplier on a continuing basis.The Tire Division cannot sell any additional products to outside customers.What is the minimum selling price that Tire should accept from the internal division?

• A) $10.00.
• B) $13.00.
• C) $15.00.
• D) $50.00.

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Definitions:

Communication

In a contract, an offer made to the offeree or the offeree’s agent.

Consumer Lease

is a contract where an individual leases goods for personal, family, or household purposes for a set period of time.

Personal Use

The use of a product, service, or property for an individual's private and non-commercial purposes.

Lessor

The party in a lease agreement who owns the property being leased out to another party, known as the lessee.