Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and Navigational Systems divisions. Condensed divisional income statements, which involve no intracompany transfers and which include a breakdown of expenses into variable and fixed components, are as follows:

The Semiconductors Division is presently producing 2,240 units out of a total capacity of 2,820 units. Materials used in producing the Navigational Systems Division€™s product are currently purchased from outside suppliers at a price of $ 432 per unit. The Semiconductors Division is able to produce the components used by the Navigational Systems Division. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses.

Instructions
1. Would the market price of $ 432 per unit be an appropriate transfer price for Exoplex Industries Inc.? Explain.
2. If the Navigational Systems Division purchases 580 units from the Semiconductors Division, rather than externally, at a negotiated transfer price of $ 310 per unit, how much would the income from operations of each division and total company income from operations increase?
3. Prepare condensed divisional income statements for Exoplex Industries Inc. based on the data in part (2).
4. If a transfer price of $ 340 per unit is negotiated, how much would the income from operations of each division and total company income from operations increase?
5. a. What is the range of possible negotiated transfer prices that would be acceptable for Exoplex Industries Inc.?
b. Assuming that the managers of the two divisions cannot agree on a transfer price, what price would you suggest as the transferprice?

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Exoplex Industries Inc. Divisional Income Statements For the Year Ended December 31, 2014 Navigational Semiconductors Systems Division Division Total Sales 2,240 unitso $396 per unit 3,675 units o $590 per unit 887,040 887040 $2,168 250 2168250 887,040 $2,168,250 $3,055290 Expenses: Variable 2,240 units o$232 per unit 3,675 units$472 per unit 519680 173400 1,73460o 220,000 325,000 545000 739680 $2059,600 $2799,280 147,360 108,650$ 256,010 519,680 Fixed Total expenses Income from operations $432 of the $472 per unit represents materials costs, and the remaining $40per unit represents other variable conversion expenses incurred within the Navigational Systems Division.