Reference no: EM132571452

There are two product departments at Bob's Baseballs Ltd. (BBL): Bats and Gloves. The Bats department produces synthetic rubbers bats in various sizes. Gloves uses the same rubber manufactured by Bats to make glove inserts that are more comfortable for recreational baseball players. Bats is able to sell each rubber bat for $10; it has variable production costs of $5 to make a decigram of rubber and $2 to turn a decigram of rubber into a bat. Selling costs for Bats are $0.50 per bat. Bats produces 2,500 decigrams of rubber, which makes 2,500 bats. This level of operations is based on 90% of capacity. Gloves would like Bats to transfer 1,500 decigrams of rubber at $6 per decigram to Gloves for the production of glove inserts. Gloves has been purchasing rubber from an outside supplier for $6.50 per decigram. Required:

Question a) Calculate whether there is a monetary benefit or cost to Bats in transferring rubber to Gloves.

Question b) Calculate the net monetary benefit or cost to BBL if this transfer is made.

Question c) Explain whether BBL should require Bats to transfer rubber to Gloves.