Brull Products, Inc., 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.
What is the total contribution margin on sales to outside customers that the Sensor Division would give up if it were to make the special sensors for the Safety Products Division?
A) $720,000
B) $353,280
C) $220,800
D) $138,000

Question

Brull Products, Inc., 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.
What is the total contribution margin on sales to outside customers that the Sensor Division would give up if it were to make the special sensors for the Safety Products Division?
A) $720,000 
B) $353,280 
C) $220,800 
D) $138,000

Quizplus · Accepted Answer

To produce the 6,000 special sensors, the Sensor Division will have to give up sales of 9,600 of the regular sensors to outside customers.
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