A company is organized into two divisions namely A and B. A produces three products, K, L and M. The relevant data per unit is given below.
|
Particulars |
K |
L |
M |
|
Market price |
Rs. 120 |
Rs. 115 |
Rs. 100 |
|
Variable costs |
84 |
60 |
70 |
|
Direct labor hours |
4 |
5 |
3 |
|
Maximum sales potential units |
1600 |
1000 |
600 |
Division B has a demand for 600 units of product L for its use. If division A cannot supply the requirements, division B can buy a similar product from market at Rs.112 per unit. What should be the transfer price of 600 units of L for division B, if the total direct labor hours available in division A are restricted to 15,000