Question 3 ZP Pic operates two subsidiaries, X and Y. X is a component manufacturing subsidiary and Y is an assembly and final product subsidiary. Both subsidiaries produce one type of output oniy. Subsidiary Y needs one component from subsidiary X for every unit of product W produced. Subsidiary X transfers to subsidiary Y all of the components needed to produce product W. Subsidiary X also sells components on the extemal market. The following budgeted information is available for each subsidiary. X Y Market price per component Shs.800 I Market price per unit of W 915.1200 Production costs per component Shs. 60!] Assembly costs per unit of W Shs.400 Non : roduction fixed costs Shs.1.5m Shs.1.3m External demand Capacity Taxation rates 25% 30% The production cost per component is 60% variable. The fixed production costs are absorbed based on budgeted output. X sets a transfer price at marginal cost plus TO per cent. Required: Calculate the post-tax profit generated by each subsidiary