OEM Company, which manufactures sports equipment, consists of several divisions. Each division operates as a profit centre with full autonomy. Division B informed Division A that it has changed its transfer pricing policy from variable-cost plus to full-cost plus pricing. Division A decided to purchase component EX1 outside the company when Division B increased the transfer price from $156 to $164 per unit. Information for Division A and Division B with respect to component EX1 is as follows: Outside price for component EX1 Division A's annual purchases Division B's variable cost per unit $160 Page 15 | 17 10,000 units $120 Division B's fixed manufacturing cost $1,000,000 Division B's production capacity 50,000 units Division B's capacity utilization 100% All units of component EX1 produced by Division B can be sold in the market. Variable selling cost is $7 per unit for external sales. All other selling and administrative costs are fixed, regardless of whether component EX1 is sold to Division A or other external customers. 29. Which of the following statements is true? a) Division A purchases 10,000 units of component EX1 from the outside supplier at a price of $160 and the company saves $40,000 in costs. b) Division B sells 10,000 units of component EX1 to Division A at $164 and the company income increases by $110,000. c) Division A purchases 10,000 units of component EX1 from Division B because Division B has idle capacity if Division A purchases the component externally. d) Division B sells all 50,000 units of component EX1 to external customers and the company maximizes its income. e) Division A purchases 10,000 units of component EX1 from Division B and the company income increases by $70,000.