Decision on transfer pricing. Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $359 per unit. However, thesame materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed bythe Instrument Division at a variable cost of $298 per unit. Assume that a transfer price of $341 has been established and that 34,200 units of materials are transferred, with no reduction in the Components Division's current sales.a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase?c. How much would the Components Division's • operating income increase?

Decision on transfer pricing. Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $359 per unit. However, thesame materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed bythe Instrument Division at a variable cost of $298 per unit. Assume that a transfer price of $341 has been established and that 34,200 units of materials are transferred, with no reduction in the Components Division's current sales.a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase?c. How much would the Components Division's • operating income increase?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 17E: Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside...

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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 $359 per unit. However, thesame materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed bythe Instrument Division at a variable cost of $298 per unit. Assume that a transfer price of $341 has been established and that 34,200 units of materials are transferred, with no reduction in the Components Division's current sales.a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase?c. How much would the Components Division's • operating income increase?
Decision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $447 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 $371 per unit. Assume that a transfer price of $425 has been established and that 26,500 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? C. How much would the Components Division's operating income increase? d. Any transfer price will cause the total income of the company to as long as the supplier division capacity is toward making materials for products that are ultimately sold to the outside.
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