Steinhoff Products, Incorporated, Has a Sensor Division That Manufactures and Sells

question 84

Multiple Choice

Steinhoff Products, Incorporated, has a Sensor Division that manufactures and sells a number of products, including a standard sensor that could be used by another division in the company, the Safety Products Division, in one of its products. Data concerning that sensor appear below: The Safety Products Division is currently purchasing 4,000 of these sensors per year from an overseas supplier at a cost of $48 per sensor.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) $76,000
• B) $969,000
• C) $120,000
• D) $20,000

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Definitions:

Endowment Funds

Funds that are established by donations with the intent that the principal amount is kept intact while the investment income is available for use.

Nonprofit Institutions

Organizations that operate for the collective public or social benefit instead of generating profit for owners or investors.

Investment Earnings

Profits or gains derived from various investments, including interest, dividends, and capital gains.

Capital Gains

The profit that results from the sale of a capital asset, such as stock, bond, or real estate, where the sale price exceeds the purchase price.