11. Division A of WRL Company produces a component part which can be sold either to outside customers or to Division B. Selected operating data follows: Division A Unit selling price to outside customers $82.00 Variable manufacturing cost per unit $55.00 Variable selling and administrative expense per unit $4.00 Fixed manufacturing cost per unit (based on a capacity of 20,000 units per year) $19.25 Division B Outside purchase price of 2,500 component parts $185,000 Division B has always purchased its component parts from outside suppliers. Mr. Thomas, who recently was appointed president of WRL Company, state, "This has got to stop, it's just plain smart business to buy and sell within the corporate family when possible." Mr. Jones, manager of Division A has decided to raise its price to outside customers to $84.00 per unit. This higher price was necessary because in recent months sales have only averaged 17,500 parts. The price of $84.00 was determined by total manufacturing cost plus approximately 10% normal markup. Additional information revealed that freight costs from Division A to Division B would cost $2.00 per unit whereas freight costs from Division A to outside customers (paid by WRL Company) have averaged only $1.00 per part. Fearing reprisal from Mr. Thomas, you as manager of Division B decide to buy the components needed in your division from Division A at the newly established price of $84.00 per part What is the effect of this pressure induced decision on the net income of WRL Company as a whole? a b. C. d. e Net income will decrease by $10.00 per part transferred Net income will decrease by $11.00 per part transferred Net income will increase by $25.00 per part transferred Net income will increase by $13.00 per part transferred Net income will increase by $18.00 per part transferred