Meers Products, Incorporated, Has a Detector Division That Manufactures and Sells

question 228

Multiple Choice

Meers Products, Incorporated, 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:

Communication Network

The structure and means by which information is transmitted and received within an organization or group.

Lines Of Command

Refers to the hierarchical structure within an organization that dictates authority, responsibility, and communication flow.

Formal

Pertaining to or following established, traditional rules or principles, often in relation to events, clothing, or language.

Etiquette

The expected norms of behavior in a particular situation.