Materials Used by Ford Company in Producing Division A's Product $\$ 25$

Essay

Materials used by Ford Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit. However, the same materials are available from Division
B. Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit.
(a)If a tranfer price of $\$ 25$ per unit is established and 60,000 units of material are transferred with no reductions in Division $B^{\prime}$ s curent sales, how much wou'd Ford Company's tot al income from operations increase?

(b)How much would the income from operations of Division A increase?
(c)How much would the income from operations of Division B increase?
(d)If the negotiated price approach is used, what would be the range of accept able tranffer prices?