Mississippi Company has two decentralized divisions, Illinois and Iowa. Illinois always has purchased certain units from Iowa at \($30\) per unit. Because Iowa plans to raise the price to \($40\) per unit, Illinois is considering buying these units from outside suppliers for \($30\) per unit. lowa’s costs follow:

Required If Illinois buys from an outside supplier, the facilities that lowa uses to manufacture these units will remain idle. What will be the result if Mississippi enforces a transfer price of \($40\) per unit between Illinois and Iowa?

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Variable costs per unit..... Annual fixed costs. Annual production of these units. $28 $100,000 5,000 units