Question 1 LG group of companies is made up of two divisions, L and G. L division manufactures a component which it sells to G division and other customers externally. The following information relates to L Division: Market price per component 200 Variable cost per component 105 Fixed costs Demand from G Division Capacity 1,375,000 per period 20,000 component per period 35,000 component per period G division sells another product which it assembles to other external customers. To assemble the product it requires two components manufactured by L division. The following information relates to G Division: Selling price per unit Variable cost per unit: Two components from L Other variable costs Fixed variable costs Demand 800 To be calculated 2@transfer price 250 900,000 per period 10,000 units per period 10,000 units per period Capacity Group Transfer Pricing Policy Transfers must be at opportunity cost G must buy the components from L