The Bat Division of World Baseball Berhad has just revised its actual cost data for 2020. Bat Division transfers goods to the Sport Division. Sport Division can buy the same goods in the open market for RM122 each. Bat's new cost data are as follows: Direct materials RM 40 Direct labor 30 Variable overhead 10 Fixed overhead 16 Variable selling expenses 6 Fixed selling and administrative expenses 12 Total costs RM114 Desired return 20 Sales price RM134 Current production is 200,000 units, and the Bat Division has a capacity of 300,000 units. Required: What is the lowest price the Bat Division should charge for the internal transfers of its goods? What is the highest price the Sport Division should pay for the units? Give the primary reason why the Bat Division should reduce its price.
The Bat Division of World Baseball Berhad has just revised its actual cost data for 2020. Bat Division transfers goods to the Sport Division. Sport Division can buy the same goods in the open market for RM122 each. Bat's new cost data are as follows: Direct materials RM 40 Direct labor 30 Variable overhead 10 Fixed overhead 16 Variable selling expenses 6 Fixed selling and administrative expenses 12 Total costs RM114 Desired return 20 Sales price RM134 Current production is 200,000 units, and the Bat Division has a capacity of 300,000 units. Required: What is the lowest price the Bat Division should charge for the internal transfers of its goods? What is the highest price the Sport Division should pay for the units? Give the primary reason why the Bat Division should reduce its price.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Bat Division of World Baseball Berhad has just revised its actual cost data for 2020. Bat Division transfers goods to the Sport Division. Sport Division can buy the same goods in the open market for RM122 each. Bat's new cost data are as follows:
|
Direct materials |
RM 40 |
|
Direct labor |
30 |
|
Variable |
10 |
|
Fixed overhead |
16 |
|
Variable selling expenses |
6 |
|
Fixed selling and administrative expenses |
12 |
|
Total costs |
RM114 |
|
Desired return |
20 |
|
Sales price |
RM134 |
Current production is 200,000 units, and the Bat Division has a capacity of 300,000 units.
Required:
- What is the lowest price the Bat Division should charge for the internal transfers of its goods?
- What is the highest price the Sport Division should pay for the units?
- Give the primary reason why the Bat Division should reduce its price.
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