A company fixes the inter-divisional transfer prices for its products on the basis of cost plus an estimated return on investment in its divisions. The relevant portion of the budget for the
Division A for the year 2006-07 is given below.
|
Particulars |
Amount in Rupees |
|
Fixed Assets |
5,00,000 |
|
Current Assets (other than debtors) |
3,00,000 |
|
Debtors |
2,00,000 |
|
Annual fixed cost for the division |
8,00,000 |
|
Variable cost per unit of product |
10 |
|
Budgeted volume of production per year (units ) |
4,00,000 |
|
Desired Return on Investment |
28% |
You are required to determine the transfer price for Division A.