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At what unit price should the component be transferred

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Question - TM plc makes components which it sells internally to its subsidiary RM Ltd, as well as to itsown external market.

The external market price is $26.00 per unit, which yields a contribution of 40% of sales. For external sales, variable costs include $2.50 per unit for distribution costs, which are not incurred on internal sales. TM plc has sufficient capacity to meet all of the internal and external sales

In order to maximise group profit, at what unit price should the component be transferred to RM Ltd?

Reference no: EM133024252

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