A department transferred goods to B department at cost + 25%. Out of it, stock of Rs. 10,000 remains with B department. Therefore, the amount of stock reserve will be

Transfer price = cost + 25% ⇒ profit = 25% of cost

Let cost = 100
Then transfer price = 125
Profit = 25

Profit as % of transfer price = 25/125 =20%

Stock with B = Rs. 10,000 (at transfer price)

Stock reserve = unrealized profit = 20% of 10,000
= Rs. 2,000

Correct answer: B. Rs. 2,000

Goods are transferred at cost + 25%
So, if cost = 100 → transfer price = 125

👉 Profit = 25 on 125
👉 Profit % on transfer price =

25
125
=
1
5
=
20
%
125
25
​

=
5
1
​

=20%
🔹 Step 2: Calculate Stock Reserve

Closing stock with B = Rs. 10,000 (includes profit)

Unrealized profit = 20% of stock:

10,000
×
1
5
=
2,000
10,000×
5
1
​

=2,000