Birrell Scientific Inc. manufactures electronic products, with two operating divisions, the GPs Systems and Communication Systems divisions, Condensed divisional incon statements, which involve no intracompany trarisfers and which include a breakdown of expenses into variable and fixed components, are as follows: Systems Division. The GPS Systems Division is presently producing 80,000 units out of a total capacity of 150,000 units. Materials used in producing the Communication Systems Divition's product are currentiy purchased from outside suppliers at a price of $60 per unit. The Gps Systems Division is able to produce the materiais used by the Communication Systems Division at a variable cost of $43 per unit. Fxcept for the possible trensfer of materials between divisions, no changes are expected in sales and expenses. Required: 1. Would the market price of $60 per unit be an appropriate transfer price for Birrell Scientilic Inc.? 2. If the Communication Systems Division purchases 25,000 units from the GPS Systems Division, rather than externatly, at a negotiated transfer price of $52 per unit, how much would the operating income of each division and the total company operating income increase? The GPS Systems Division's operating income would increase by The Communication Systems Division's operating income would increase by Birrell Scientific Inc.'s total operating income would increase by The Communication Systems Division's operating income would increase by Birrell Scientific Incis total operating income would increase by 3. Prepare condensed divisional income statements for Birrell Scientific Inc. based on the data in part (2). All work saved. 3. Keep in mind, 25,000 units are transferred in at 352 per unit plus 33 in other variable conversion expences incurred within the division, 4. If a transfer price of $49 per unit is negotiated, how much would the operating income of each division and the total company ogerating income increase? The GPS Systems Division's operating income would increase by The Communication Systems Division's operating income would increase by Birrell Scientific Scientific Inci's total operating income would increase by 4. If a transfer price of $49 per unit is negotiated, how much would the operating income of each division and the total company operating income increase? The GPS Systems Division's operating income would increase by The Communication Systems Division's operating income would increase by Birrell Scientific Scientific Inci's total operating income would increase by 5a. What is the range of possible negotiated transfer prices that would be acceptable for Birrell Scientific inc.? Between 1 and $ 5b. Assuming that the managers of the two divisions cannot agree on a transter price, nhat transler price would represent the best compromise? If required, round your answer to the nearest dollar. Feechask T Check Mr Work 4. Multiply the units transferred by the difference between the transfer price (supplying company) of the market price (purchasing company) and the variable cost per unit. 5. Consider the choices of transfer prices versus purchase prices
