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By how much will each division income increase

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Problem - Transfer pricing - The materials used by the Vancouver Division of Roberts Company are currently purchased from outside suppliers at $45 per unit. These same materials are produced by Roberts' Tucson Division. The Tucson Division can produce the materials needed by the Vancouver Division at a variable cost of $30 per unit. The division is currently producing 100,000 units and has capacity of 130,000 units. The two divisions have recently negotiated a transfer price of $38 per unit for 25,000 units. By how much will each division's income increase as a result of this transfer?

Reference no: EM132687250

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