Transfer Pricing

The materials used by the Winston-Salem Division of Fox Company are currently purchased from outside suppliers at $34 per unit. These same materials are produced by Fox's Flagstaff Division. The Flagstaff Division can produce the materials needed by the Winston-Salem Division at a variable cost of $17 per unit. The division is currently producing 168,000 units and has capacity of 240,000 units. The two divisions have recently negotiated a transfer price of $24 per unit for 72,000 units.

By how much will each division's income increase as a result of this transfer?

Winston-Salem Division	$
Flagstaff Division	$