Medical Group manufactures innovative range of products, which is used for the replacement of various injured parts of the body. The company is using divisionaized structure. The objective of each division is to maximise divisional profits as well as the companies profit.

Company has two divisions Division A and Division B. Division A manufacture Joint support appliances. Division B purchases products from different sources including Division A, packs them and sells them to retailers.

The following information is available about both the divisions.

Division A

Production’s cost:	OMR
Direct materials per unit	30
Direct labour	35
Variable overhead per unit	25
Division fixed cost	50,000

Division B

Packing & Retail costs:	OMR
Direct materials	10
Direct labour per unit	5
Variable overhead per unit	5
Division fixed cost	30,000

Notes: Fixed costs shown above are for 5,000 units.

Required:

1. What is the transfer price if Diviaion A sells product to Division B at Marginal cost +30%.     

2. Division B has purchased 5,000 units from division A and sold to outside market for OMR 125. what is the annual profit of Division A and division B?
3. Evaluate the profit of both the divisions and comment if it is a sensible trasnsfer price to achieve goal congruence.