Decision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $389 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 $323 per unit. a. If a transfer price of $354 per unit is established and 35,600 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? X . How much would the Instrument Division's operating income increase? c. How much would the Components Division's operating income increase?

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Decision on transfer pricing
Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $389 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 $323 per unit.
a. If a transfer price of $354 per unit is established and 35,600 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?
X
$
b. How much would the Instrument Division's operating income increase?
$
C.
$
How much would the Components Division's operating income increase?
Transcribed Image Text:Decision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $389 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 $323 per unit. a. If a transfer price of $354 per unit is established and 35,600 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? X $ b. How much would the Instrument Division's operating income increase? $ C. $ How much would the Components Division's operating income increase?
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