Decision on transfer pricing OBJ. 5 Based on XPort Industries data in Exercise assume that a transfer

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Decision on transfer pricing OBJ. 5 Based on XPort Industries’ data in Exercise assume that a transfer price of $190 has been established and that 60,000 units of materials are transferred, with no reduction in the Components Division’s current sales.

a. How much would XPort 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?

d. If the negotiated price approach is used, what would be the range of acceptable transfer prices and why?

a. $3,000,000

b. $1,200,000 Problems: Series A

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