Answer the Following Questions Using the Information Below:
Calculate the Division

True/False

Answer the following questions using the information below:
Calculate the Division operating profit for the Don's Cricket Bat Company which manufactures cricket bats.It has two divisions: the Bat Blade Division and the Assembly Division.The Bat Blade Division manufactures blades for the Assembly Division,which splices handles to the blades and sells the completed bats to retailers.The Bat Blade Division 'sells' blades to the Assembly Division.The market price for the Assembly Division to purchase a blade is $40.(Ignore changes in inventory. )The fixed costs for the Bat Blade Division are assumed to be the same over the range of 20 000-50 000 units.The fixed costs for the Assembly Division are assumed to be $14 per bat at 50 000 units.
Costs per blade are:
$\begin{array}{ll}\text { Direct materials } & \$ 8 \\\text { Direct labour } & \$ 6 \\\text { Variable overhead } & \$ 4 \\\text { Division fixed costs } & \$ 2\end{array}$

Assembly's costs per completed bat are:
$\begin{array} { l r } \text { Direct materials } & \$ 12 \\ \text { Direct labour } & \$ 4 \\ \text { Variable overhead } & \$ 1 \\ \text { Division fixed costs } & \$ 14 \end{array}$
-A disadvantage of using budgeted costs for transfer prices is that inefficiencies in actual costs can be passed along to the receiving division.