Transfer pricing Garcon Inc. manufactures electronic products, with two operating divisions, Consumer and Commercial. Condensed divisional income statements, which involve no Intracompany transfers and which include a breakdown of expenses into variable and fixed components, are as follows: Garcon Inc. Divisional Income Statements For the Year Ended December 31, 2012 Consumer Division Commercial Total Division Sales: 14,400 units x $144 per unit $2,073,600 $2,073,600 21,600 units x $275 per unit $5,940,000 5,940,000 Total sales $2,073,600 $5,940,000 $8,013,600 Expenses: Variable: 14,400 units x $104 per unit $(1,497,600) $(1,497,600) 21,600 units x $193* per unit $(4,168,800) (4,168,800) Fixed Total expenses Operating income $1,627,200 "$150 of the $193 per unit represents materials costs, and the remaining $43 per unit represents other variable conversion expenses incurred within the Commercial Division. (200,000) $(1,697,600) (520,000) (720,000) $(4,688,800) $(6,386,400) $376,000 $1,251,200