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A Ltd has a system of assessment of Divisional performance on the basis of residual income, has two divisions A & B. Division A has
A Ltd has a system of assessment of Divisional performance on the basis of residual income, has two divisions A & B. Division A has an annual capacity to manufacture 15 lac numbers of a special component that it sells to outside customers, but has idle capacity. The budgeted residual income of Division A & B is? 100 lacs and 120 lacs respectively. Other relevant budgeted details for Division A for the current year are : 12 lac units @ *180/ unit 160 Sale (outside customers) Variable Cost per unit Divisional Fixed Cost Capital Employed Cost of Capital 80 lac 750 lac 12% Division B has just received a special order for which it requires components similar to the ones made by Division A. Owing to idle capacity of Division A, Division B has asked to quote for manufacture and supply of 3 Lac numbers of the components with a slight modification during final processing. Division A & B agree B that additional variable cost will be 5 per unit. Calculate the transfer price to be quoted to achieve the budgeted residual income by Division A A Ltd has a system of assessment of Divisional performance on the basis of residual income, has two divisions A & B. Division A has an annual capacity to manufacture 15 lac numbers of a special component that it sells to outside customers, but has idle capacity. The budgeted residual income of Division A & B is? 100 lacs and 120 lacs respectively. Other relevant budgeted details for Division A for the current year are : 12 lac units @ *180/ unit 160 Sale (outside customers) Variable Cost per unit Divisional Fixed Cost Capital Employed Cost of Capital 80 lac 750 lac 12% Division B has just received a special order for which it requires components similar to the ones made by Division A. Owing to idle capacity of Division A, Division B has asked to quote for manufacture and supply of 3 Lac numbers of the components with a slight modification during final processing. Division A & B agree B that additional variable cost will be 5 per unit. Calculate the transfer price to be quoted to achieve the budgeted residual income by Division A
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