Department Details:

• Department X (Manufacturing):
  • Variable Costs: $500,000
  • Fixed Costs: $300,000
  • Production Capacity: 40,000 units

• Department Y (Sales):
  • Variable Costs: $400,000
  • Fixed Costs: $200,000
  • Demand: 35,000 units

Requirements:

• Determine the transfer price per unit for Department Y to acquire products from Department X using the market-based method.
• Evaluate the impact on the overall profitability of the company.
• Present the transfer pricing calculations in a table.
• Discuss the benefits and challenges of the chosen transfer pricing method.