Meers Products, Inc

question 60

Multiple Choice

Meers Products, Inc., has a Detector Division that manufactures and sells a number of products, including a standard detector that could be used by another division in the company, the Commercial Security Division, in one of its products. Data concerning that detector appear below: The Commercial Security Division is currently purchasing 7,000 of these detectors per year from an overseas supplier at a cost of $93 per detector.
Assume that the Valve Division is selling all of the valves it can produce to outside customers. From the standpoint of the Valve Division, what is the lost contribution margin if the valves are transferred internally rather than sold to outside customers?

• A) $133,000
• B) $469,000
• C) $2,537,000
• D) $413,000

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Definitions:

Elasticities

A measure of how much the quantity demanded or supplied of a good responds to a change in one of its determinants, such as price or income.

Total Sales

The aggregate revenue received from selling goods or services over a given period of time.

Complement

A good or service that is used together with another, where the use or consumption of one increases the value or demand of the other.

Inter-relatedness

The condition or fact of being connected and having reciprocal effects or influences among components or variables.