A is capable of making two products, X and Y.
A can sell both products externally as follows:
X Y
External selling price 8,000 10,000
Variable costs 6,000 7,000
Contribution p.u. 2,000 3,000
A has limited labour available.
The labour hours required for each product are
X: 5 hours p.u., Y: 10 hours p.u.
A has unlimited external demand for both products.
Division B requires product Y from Division A.
Required:
Calculate the minimum transfer price that should be charged by A for supply of
Product Y to Division B
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