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XYZ Ltd had two decentralized division A & B. Division A has always purchased certain units from Division B at Rs 7500 per unit. Because
XYZ Ltd had two decentralized division A \& B. Division A has always purchased certain units from Division B at Rs 7500 per unit. Because Division B plans to raise the price to Rs 10,000 per unit, Division A desired to Purchase these units from outside suppliers for Rs 7500 per unit. Division B's cost are as follows: B's Variable cost per unit: Rs 7000 B's Annual fixed cost Rs 15,00,000. B's Annual purchase of these 1,00,000 units for A. Required: If division A buys from the outside supplier, the facilities division B uses to manufacture these units would remain idle. Would it be more profitable for the company to enforce the transfer price of Rs 10,000 per unit than to allow A to buy from outside suppliers at Rs 7500 per unit
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