The materials used by the Vancouver Division of Roberts Company are currently pu

Question

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 (Tuscan and Vancouver) income increase as a result of this transfer?

Explanation / Answer

Vancouver Division of Roberts Company

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