Problem 13.9 (Selection of Transfer Price) P Ltd. has two divisions, S and T. S transfers all its output to T. which finishes the work. Costs and revenues at various levels of capacity are as follows: Output S Costs T Net revenues Profit (i.e. revenue minus costs incurred in T) Units Rs. Rs. Rs. 600 600 2,950 2,350 700 700 3,250 2,550 800 840 3,530 2,690 900 1.000 3,780 2,780 1,000 1,200 4,000 2.800 1.100 1.450 4,200 2,750 1,200 1,800 4,350 2,550 Company profits are maximised at Rs. 2,800 with output of 1,000 units. If P Ltd. wish to select a transfer price in order to establish S and Tas profit centres, what transfer price would motivate the managers of Sand T together to produce 1,000 units, no more and no less? P. Lid wants that the transfer price should be set a Rs. 2.10 per unit. Com nt on this proposal