The Milk Chocolate Division of Mmmm Foods, Inc. had the following operating results last year: sales (150,000 pounds of chocolate) $60,000. Variable expense $37500, contribution margin $22500, Fixed Expense $12,000. Profit $10,500.
Milk Chocolate expects identical operating results this year. The Milk Chocolate Division has the ability to produce 200,000 pounds of chocolate annually.
Assume that the Milk Chocolate Division is currently operating at its capacity of 200,000 pounds of chocolate. Also assume again that the Peanut Butter Division wants to purchase an additional 20,000 pounds of chocolate from Milk Chocolate. Under these conditions, what amount per pound of chocolate would Milk Chocolate have to charge Peanut Butter in order to maintain its current profit?