past paper Man co ( June 2016)
Divison L ( selling division )
capacity of plant is 300,000 ( spare capacity is 140000)
external demand is 160,000
Divison M ( buying division )
Capacity of plant is 130,000
external demand is 120,000
how many units Div L should sell to Div M??
120,000
or
130,000???
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Transfer price
5y ago#1120,000 units (as per the examiners answer).
Given that Division M only has demand for 120,000 units, they are not going to buy more than 120,000 components from Division L.
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