Based on Armstrong Manufacturing’s data in Exercise 14-20, assume that a transfer price of $190 has been established and that 35,000 units of materials are transferred, with no reduction in the Components Division’s current sales.
a. How much would Armstrong Manufacturing’s total income from operations increase?
b. How much would the Engine Division’s income from operations increase?
c. How much would the Components Division’s income from operations increase?
d. If the negotiated price approach is used, what would be the range of acceptable transfer prices and why?