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Decision on Transfer Pricing

Materials used by the Instrument Division of T_Kong Industries are currently purchased from outside suppliers at a cost of $435 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 $361 per unit.

Assume that a transfer price of $413 has been established and that 25,300 units of materials are transferred, with no reduction in the Components Divisions current sales.

a. How much would T_Kong 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? $___