What is the maximum price that the Pump Division should pay

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Problem - Cichy Products, Inc., 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:

Capacity in units 80,000

Selling price to outside customers $90

Variable cost per unit $37

Fixed cost per unit (based on capacity) $32

The Pump Division is currently purchasing 5,000 of these valves per year from an overseas supplier at a cost of $85 per valve.

Required - What is the maximum price that the Pump Division should be willing to pay for valves transferred from the Valve Division?

A) $37 per unit

B) $85 per unit

C) $32 per unit

D) $69 per unit

Reference no: EM132918415

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