Koppenhaver Products, Incorporated Has a Relay Division That Manufactures and Sells

question 242

Multiple Choice

Koppenhaver Products, Incorporated has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below: The Electronics Division is currently purchasing 15,000 of these relays per year from an overseas supplier at a cost of $57 per relay. Assume that the Valve Division is selling all of the valves it can produce to outside customers. Also assume that $10 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?

• A) $57 per unit
• B) $41 per unit
• C) $53 per unit
• D) $63 per unit

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