Steinhoff Products, Inc., 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: Capacity in units 51,000Selling price to outside customers$56Variable cost per unit$37Fixed cost per unit (based on capacity)$14?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. $969,000
B. $120,000
C. $20,000
D. $76,000
Answer: D
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