Decision on Transfer Pricing Materials used by the Instrument Division of XPort Industries are currently purchased...

Decision on Transfer Pricing

Materials used by the Instrument Division of XPort Industries are currently purchased from outside suppliers at a cost of $342 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $284 per unit.

a. If a transfer price of $311 per unit is established and 29,900 units of materials are transferred, with no reduction in the Components Division's current sales, how much would XPort Industries’ total income from operations increase?
$fill in the blank 1

b. How much would the Instrument Division’s income from operations increase?
$fill in the blank 2

c. How much would the Components Division's income from operations increase?
$fill in the blank 3

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Expert Solution

Please comment for any explanation,

Thanks,

ekkarill92 answered 10 months ago

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