The Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing the Commercipl Division's product are currently purchased from outside supplers at a price of $150 per unit. The Consumer Division is able to produce the materials used by the Commercial Divion. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses. Required: 1. Would the market price of $150 per unit be an appropriate transfer price for Gavcan the.? Explain 2. If the Commercial Division purchases 2,890 units from the Consumer Ovision, rather than externally, at a negotiated fransfor price of $115 per unit, how much would the income from operations of each divion and the fotal corpany income from operations increase? 3. Prepare condensed divisional income statements for Garcon ine based on the data in Aequirement 2 4. If a transfer price of $126 per unt is negotiated, how mich would the income from operafions of each division and the fotal company income from operations increase? 5a. What is the range of possible negotated transfer prices that would be acceptable for Garcon inc? 50. Assuming that the managers of the two divisions cannot agree on a transfer price, what price would you suggest as the transfer price? 5a. What is the range of possible negotiated transter prices that would bo accoptablo for Garcon inc? Any transler price than the Consumer Division's variable expenses per unit but than the market price would be acceptabie. 5b. Assuming that the managers of the fwo divisions cannot agree on a fransfer price, what price would you supgest as the transfer price? 3. Prepare condensed divisional income statements for Garcon Inc. based on the data in Requirement 2. 4. If a transter price of $126 per unt is negotiated, how much would the income from operations of each division and Bho total company income from operations increase? The Consumer Division's income from ceerations would increase by The Commercial Divions income from operations woyld increase by Garcon inc.'s total income from operafions would increase by Garcon inc manulactures electronic products, with two operafing divisions, Consumer and Commereial. Condensed divisional income stalements, which irvolve no intracompary transfers and which include a breakdown of expenses into variable and fued components, are as follows: 2. If the Commercial Division purchases 2,880 units from the Consumer Divion, rather than extemally at a negotiated transter price of $115 per unit, how much would the income from oporations of each division and the todal company income from operations incroase? The Consurner Division's income from operations would increase by The Commercial Division's income from operations would increase by Garcon inc.'s total income from operations would incresse by
