Decision on transfer pricing
materials used by the instrument division of t_kong industries are currently purchased from outside suppliers at a cost of $175 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 $122 per unit.
a. if a transfer price of $148 per unit is established and 50,000 units of materials are transferred, with no reduction in the components division’s current sales, how much would t_kong industries’ total income from operations increase? $
b. how much would the instrument division's income from operations increase? $
c. how much would the components division's income from operations increase? $