Ted Company has two decentralized divisions, X and Y. Division X has always purchased certain units from Division Y at $75 per unit. Because Division Y plans to raise the price to $100 per unit, Division X is seeking an outside supplier of the part for the old price of $75 per unit. Division Y's costs follow:

Y's variable costs per unit ..................................... $70

Y's annual fixed costs ........................................... $15,000

Y's annual production of these units for X ........... 1,000 units

If Division X buys from an outside supplier, the facilities Division Y uses to manufacture these units would be idle. What would be the result if the top management of Ted Company insists that Division X purchase from Division Y at a transfer price of $100 per unit?

(Note: Compare the impact of taking decision of going for internal purchase than that from outside supplier. Give proper background of transfer pricing linking with this example)