Calculate the minimum transfer price that RD can justify given its full capacity.

CA Final · Integrated Business Solutions (Multidisciplinary Case Study) · MTP · May 2026
Calculate the minimum transfer price that RD can justify given its full capacity.

Suggested Answer and Working Notes:

Total capacity 30,000 MH (fully used by P1 & P2). Hence → capacity constrained. Contribution per MH from external products = 90. To make 4,000 units of P4 requires 4 MH x 4,000 - 16,000 МН. Opportunity cost= 90 x 4 = 360 per unit Variable cost 150 per unit. Minimum Transfer Price - 150+360 = 510 per unit. Thus, any price < 510 reduces total contribution; goal congruence exists only if TP > 510.
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