A company makes components and sells internally to its subsidiary and also to external market. The external market price is ?24 per component, which gives a contribution of 40% of sales. For external sales, variable costs include ?1.50 per unit for distribution costs. This is, however not incurred in internal sales. There are no capacity constraints. To maximize company profit, the transfer price to subsidiary should be:

Syllabus (with weightage)
A. Cost Management 20%
B. Strategic Cost Management Tools and Techniques 50%
C. Strategic Cost Management - Application of Statistical Techniques in Business Decisions 30%

Related Test: CMA Intermediate Exam: Cost and Management Accounting