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

question 281

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Brull Products, Incorporated, has a Sensor Division that manufactures and sells a number of products, including a standard sensor. Data concerning that sensor appear below: Brull Products, Incorporated, has a Sensor Division that manufactures and sells a number of products, including a standard sensor. Data concerning that sensor appear below:   The Safety Products Division of Brull Products, Inc needs 6,000 special heavy-duty sensors per year. The Sensor Division's variable cost to manufacture and ship this special sensor would be $60 per unit. Because these special sensors require more manufacturing resources than the standard sensor, the Sensor Division would have to reduce its production and sales of standard sensors to outside customers from 56,000 units per year to 46,400 units per year.From the standpoint of the Sensor Division, what is the minimal acceptable transfer price for the special sensors for the Safety Products Division? A)  $75.00 per unit B)  $77.00 per unit C)  $83.00 per unit D)  $96.80 per unit The Safety Products Division of Brull Products, Inc needs 6,000 special heavy-duty sensors per year. The Sensor Division's variable cost to manufacture and ship this special sensor would be $60 per unit. Because these special sensors require more manufacturing resources than the standard sensor, the Sensor Division would have to reduce its production and sales of standard sensors to outside customers from 56,000 units per year to 46,400 units per year.From the standpoint of the Sensor Division, what is the minimal acceptable transfer price for the special sensors for the Safety Products Division?

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Definitions:

Manufacturing Cycle Efficiency

A measure of the efficiency of the production process, calculated as the ratio of value-added time to the total cycle time.

Non-value-added Time

Time that does not contribute directly to the final value or quality of the product or service, often seen as a target for reduction in process improvement efforts.

Throughput Time

The elapsed time from when production is started until finished goods are shipped.

Residual Income

The net operating income that an investment center earns above the minimum required return on its operating assets.

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