The Bat Division of Baseball Company Has Just Revised Its

Essay

The Bat Division of Baseball Company has just revised its actual cost data for the current year.Bat Division transfers goods to the Sport Division.Sport Division can buy the same goods in the open market for $122 each.Bat's new cost data are as follows:
$\begin{array}{llr} \text { Direct materials } &\$40\\ \text {Direct labour } &30\\ \text { Variable overhead } &10\\ \text { Fixed overhead} &16\\ \text {Variable selling expenses } &6\\ \text { Fixed selling and administrative expenses } &12\\ \text { Total costs } &\$114\\ \text {Desired return } &20\\ \text { Sales price } &\$134\\\end{array}$
Current production is 200,000 units,and the Bat Division has a capacity of 300,000 units.
a.What is the lowest price the Bat Division should charge for the internal transfers of its goods?
b.What is the highest price the Sport Division should pay for the units?
c.Give the primary reason that the Bat Division should reduce its price.