1. Materials used by the Instrument Division of T_Kong Industries are currently purchased from outside suppliers at a cost of $348 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 $289 per unit.

   Assume that a transfer price of $331 has been established and that 48,000 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? $

   d. Any transfer price will cause the total income of the company to

   • increase
   • decrease
   , as long as the supplier division capacity is
   • used
   • not used
   toward making materials for products that are ultimately sold to the outside.