Evaluate Transfer Pricing System (L.O.2): Mar Company has two decentralized divisions, X and Y. Division X has always purchased certain units from division Y at $75 per unit. Because division Y plans to raise the price to $100 per unit, division X desires to purchase these units from outside suppliers for $75 per unit. Division Y's costs follow:

Required:

If division X buys from an outside supplier, the facilities division Y uses to manufacture these units would remain idle. What would be the result if Mar enforces a transfer price of $100 per unit between divisions X and Y?

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Y's variable costs per unit $ Y's annual fixed costs Y's annual production of these units for X 70 15,000 1,000 units