The Dairy Division of Famous Foods, Inc. produces and sells milk to outside customers.

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: Sales (160,000) gallons $500,000 Variable costs 312,000 Contribution margin 188,000 Fixed costs 100,000 Net Income $88,000 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 $1.18 per gallon. $2.50 per gallon. $1.95 per gallon. $0.55 per gallon.

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