Decision on transfer pricing Materials used by the Instrument Division of Ziegler Inc....
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Accounting
Decision on transfer pricing
Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $ per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $ per unit.
a If a transfer price of $ per unit is established and units of materials are transferred, with no reduction in the Components Division's current sales, how much would Ziegler Inc.s total operating income increase?
b How much would the Instrument Division's operating income increase?
X
c How much would the Components Division's operating income increase?
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TCheck My Work variable cost, or the market price and transfer cost. Then, multiply the difference by the units transferred.
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