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

question 35

Multiple Choice

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:
$\begin{array} { l r } \text { Direct materials } & \$ 12 \\ \text { Direct labour } & \$ 4 \\ \text { Variable overhead } & \$ 1 \\ \text { Division fixed costs } & \$ 14 \end{array}$
-Calculate and compare the difference in overall corporate net profit between Scenario A and Scenario B if the Assembly Division sells 50 000 blades for $120 each to customers.
Scenario A: Negotiated transfer price of $15 per blade
Scenario B: Market-based transfer price

• A)$500 000 more net profit under Scenario A
• B)$100 000 of net profit using Scenario A
• C)$500 000 of net profit using Scenario B
• D)None of these answers are correct.

---

Definitions:

Competitors Copy

The act of rival companies imitating products, services, strategies, or practices of each other, trying to gain a competitive advantage.

Technology

Utilizing scientific understanding for real-world applications, primarily in the industrial sector.

Industry Wide Markets

Pertains to markets that encompass products, services, and consumers across an entire industry, rather than being limited to specific segments.

Focused

Having clear concentration and attention on a specific task, goal, or activity, leading to increased efficiency and productivity.