Materials used by the Instrument Division of Ziegler Inc. are currentlypurchased from outside suppliers at a cost of $1,350 per unit. However,the same materials are available from the Components Divison. TheComponents Division has unused capacity and can produce thematerials needed by the Instrument Division at a variable cost of $900per unit. a. If a transfer price of $1,000 per unit is established and 75,000units of materials are transferred, with no reduction in theComponents Division's current sales, how much would ZieglerInc.'s total operating income increase?b. How much would the Instrument Division's operating incomeincrease?c. How much would the components Division's operating incomeincrease?
Materials used by the Instrument Division of Ziegler Inc. are currently
purchased from outside suppliers at a cost of $1,350 per unit. However,
the same materials are available from the Components Divison. The
Components Division has unused capacity and can produce the
materials needed by the Instrument Division at a variable cost of $900
per unit.
a. If a transfer price of $1,000 per unit is established and 75,000
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?
c. How much would the components Division's operating income
increase?
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