FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:The Z division of MCX Ltd. Produces a component which it sells externally and can also
be transferred to division X. Division Z has set a performance target for the coming
financial year of residual income of 7 50,00,000. The following budgeted information
relating to Z division has been prepared for the coming financial year:
Maximum production / sales capacity is 8,00,000 units.
Sales to external customers 5,00,000 units at 7 37 per unit.
Variable cost per component is 7 25.
Fixed cost directly attributable to the division is ? 14,00,000.
Capital employed in the division is 2,00,00,000 with cost of capital of 13%.
The X division of MCX Ltd. has asked Z division to quote a transfer price for 3,00,000 units
of the component.
Calculate the transfer price for the component which Z division should quote to X division
so that its residual in come target is achieved.
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