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A Company has two divisions - Di, and D2, Di, manufactures 10,000 units of a...

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Accounting

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A Company has two divisions - Di, and D2, Di, manufactures 10,000 units of a component per month operating at 80% of its capacity incurring variable cost of 750 per unit and fixed cost of 21.00,000per month. It can sell 8,000 units of the component per month in the external market @ 390 per unit. So far Di, has been transferring 10,000 units of the component per month to Dz @ 770 per unit. The components are used by Di, which is operating at its full capacity, for 10,000 units of its final product Q. D2 incurs variable costs of 40 per unit and fixed costs of 150,000 per month, and sells Q in the external market at 150 per unit. In view of the higher market price of the component, Di, wants to increase its transfer price to 280 per unit. Suggest the minimum transfer price per unit of the component that D, should charge and also show the resultant monthly profit of the divisions at their 100% capacity utilization

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