Lumpkins Products, Incorporated, Has a Valve Division That Manufactures and Sells

Multiple Choice

Lumpkins Products, Incorporated, has a Valve Division that manufactures and sells a number of products, including a standard valve that could be used by another division in the company, the Pump Division, in one of its products. Data concerning that valve appear below: The Pump Division is currently purchasing 9,000 of these valves per year from an overseas supplier at a cost of $59 per valve.Assume that the Valve Division is selling all of the valves it can produce to outside customers. Also assume that none of the variable expenses can be avoided on transfers within the company. What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?

A) $50 per unit
B) $38 per unit
C) $62 per unit
D) $59 per unit