Hello. The following question is related to Transfer Pricing. The income statement below is filled out to assist with the set question. If possible, please show your calculations and provide a brief explanation (i.e. how you arrived at your calculations or used the figures that you did). Thank you in advance.

Wall Co. manufactures electronic parts, with two operating divisions, the Gyro Systems and Computer Systems divisions. Condensed divisional income stattements, which involve no intracompany transfers and which include a breakdown of expenses into variable and fixed components are as follows:

		Gyro Systems Division	Computer Division	Total
Sales:
	85,000 units @ $60 per unit	$5,100,000		$5,100,000
	155,000 units @$115 per unit		$17,825,000	17,825,000
Expenses:
	Variable:
	85,000 units @ $41 per unit	$3,485,000		$3,485,000
	155,000 units @ $90 per unit		$13,950,000	$13,950,000
Fixed Costs		$250,000	$525,000	$775,000
Total Expenses		$3,735,000	$14,475,000	$18,210,000
Income from Operations		$1,365,000	$3,350,000	$4,715,000

The Gyro Division is presently producing 85,000 units out of a total capacity of 150,000 units. Materials used in producing the Computer Division product are currently purchased from ourside suppliers at a price of $60 per unit. The Gyro Division is able to produce the materials used by the Computer Division. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses.

QUESTION

If a transfer price of $49 per unit is negotiated, how much would the income from operations of each division and the total company income from operations increase?

A) The Gyro Systems Division income from operations would increase by?

B) The Computer Systems Division income from operations would increase by?

C) Wall Co.'s total income from operations would increase by?

What is the range of possible negotiated transfer prices that would be acceptable for Wall Co.? Between $------------- and $-------------------

Assuming that the managers of the two divisions cannot agree on a transfer price, what transfer price would represent the best compromise? $---------------

Here is a condensed divisional income statements for Wall Co.

		Gyro Systems	Computer Systems	Total
Sales:
	85,000 units	5.1m		5.1m
	25,000 units	1.3m		1.3m
	155,000 units		17.825m	17.825m
Expenses
Variable:	110,000 units	4.51m		4.51m
	25,000 units		1.3m	1.3m
	130,000 units		11.7m	11.7m
Fixed		.250m	.525m	.775m
Total Expenses		4.76m	13.525m	18.285m
Income from Operations		1.64m	4.3m	5.94m