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.