Decision on transfer pricing

Materials used by the Instrument Division of XPort Industries are currently purchased from outside suppliers at a cost of $213 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $177 per unit.

Assume that a transfer price of $202 has been established and that 30,300 units of materials are transferred, with no reduction in the Components Divisions current sales.

a. How much would XPort Industries total income from operations increase? $

b. How much would the Instrument Divisions income from operations increase? $

c. How much would the Components Divisions income from operations increase? $

d. Any transfer price will cause the total income of the company to , as long as the supplier division capacity is toward making materials for products that are ultimately sold to the outside.