elmall Sdentific Inc. manufactures electronic products, with two operating divisions, the GPS Systems and Communication Systems divisions. Condensed divisional Income statements, which involve no Intracompany transfers and which include a breakdown of expenses Inta variable and fixed components, are as follows: Birrell Scientific Inc. Divisional Income Statements For the Year Ended December 31, 2015 Communication GPS Systems Systems Division Division Total Sales: 95,000 units $60 per unit $5,700,000 $5,700,00D 16,100,000 110,000 units $115 per unit $16, 100.000 $5,700,000 $16,100,000 $21,900,000 Expenses Variable: 95,000 units 544 per unit 140,000 units on per unit ${4,180,000) $14,180,000) (12,600,000) ${ $(12,500,000) ( (600,000) Fixed 250,000 (850,000) Total expenses $ $(4,430,000) $1,270,000 $(13,200,000) $2,900,000 ${17,630,000) $4,170,000 Operating Income $50 of the $90 per unit represents materials costs, and the remaining $30 per unit represents other variable conversion expenses incurred within the Communication Systems Division The GPS Systems Division is presently producing 95,000 units out of a total capacity of 150,000 units. Materials used in producing the Communication Systems Division's product are currently purchased from outside suppliers at a price of $60 per unit. The GPS Systems Division is able to produce the materials used by the Communication Systems Division at a variable cost of $44 per unit. Except for the possible transfer of materials between divisions, nu changes are expected in sales and expenses. Required: 1. Would the market price of $60 per unit be an appropriate transfer price for Birell Scientific Inc.? No 2. If the Communication Systems Division purchases 25,000 units from the GPS Systerns Division, rather than externally, eto 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 s 200,000 The Communication Systems Division's operating income would increase by 450,000 X Birrell Scientific Inc.'s total operating income would increase by S 3. Prepare condensed divisional income statements for Birrell Scientific Inc. based on the data in part (2) Birrell Scientific, Inc. Divisional Income Statements For the Year Ended December 31, 2015 GPS Division Communication Division Total Sales: 95,000 units 25,000 units 110,000 units SI $ Expenses: Variable: 120,000 units S 25,000 units 115,000 units Fixed Total expenses Operating income Feedback Check Mr Work 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 s The Communication Systems Division's operating income would increase by Birrell Scientific Scientific Inc.'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 and $
