(a) What transfer price would you recommend? Why?

(b) What recommendations do you have for the programming division?

Return on investment Michelle Gutierrez, manager of the Components Division of FX Corporation, is considering a new investment for her division. The division has an investment base of $4,000,000 and operating income of $600,000. The new investment of $500,000 supports corporate strategy and is expected to increase operating income by $50,000 next year, an acceptable level of return from corporate headquarters point of view.

Explain accounting theory behind answer.