Garcon Inc. Divisional Income Statements For the Year Ended December 31, 20Y2 Consumer Division 1 Commercial Division Total 2 Sales: 14,400 units * $144 per unit 21,600 units * $275 per unit 3 $2,073,600.00 $2,073,600.00 5,940,000.00 4 $5,940,000.00 5 Total sales $2,073,600.00 $5,940,000.00 $8,013,600.00 6 Expenses: 7 Variable: 8 $1,497,600.00 $1,497,600.00 14,400 units * $104 per unit 21,600 units * $1939 per unit 19 $4,168,800.00 4,168,800.00 110 Fixed 200,000.00 520,000.00 720,000.00 Total expenses $4,688,800.00 $6,386,400.00 $1,697,600.00 $376,000.00 12 Income from operations $1,251,200.00 $1,627,200.00 Instructions 9 21,600 units * $193* per unit $4,168,800.00 4,168,800 10 Fixed 200,000.00 520,000.00 720,000 Total expenses 11 $1,697,600.00 $4,688,800.00 $6,386,400 12 Income from operations $376,000.00 $1,251,200.00 $1,627,200 *$150 of the $193 per unit represents materials costs, and the remaining 843 per unit represents other variablo conversion expenses incurred wit the Commercial Division The Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing Commercial Division's product are currently purchased from outside suppliers at a price of $150 per unit. The Consumer Divis able to produce the materials used by the Commercial Division. Except for the possible transfer of materials between division changes are expected in sales and expenses. Required: 1. Would the market price of $150 per unit be an appropriate transfer price for Garcon Inc. ? Explain. If the Commercial Division purchases 2,880 units fry the Consumer Division, rather than externally, at a negotiated transfer price of $115 per unit how much would the income from onerations of each division and the total company 2. e Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing the bmmercial Division's product are currently purchased from outside suppliers at a price of $150 per unit. The Consumer Division le to produce the materials used by the Commercial Division. Except for the possible transfer of materials between divisions, anges are expected in sales and expenses. Required: 2. 1. Would the market price of $150 per unit be an appropriate transfer price for Garcon Inc. ? Explain. If the Commercial Division purchases 2,880 units from the Consumer Division, rather than externally, at a negotiated transfer price of $115 per unit, how much would the income from operations of each division and the total company income from operations increase? 3. Prepare condensed divisional income statements for Garcon Inc. based on the data in Requirement 2. 4. If a transfer price of $126 per unit is negotiated, how much would the income from operations of each division and the total company income from operations increase? 5a. What is the range of possible negotiated transfer prices that would be acceptable for Garcon Inc.? 5b. Assuming that the managers of the two divisions cannot agree on a transfer price, what price would you suggest as the transfer price