Bart Enterprises is decentrally organized. One of its divisions, Krusty Components, manufactures truck and trailer brake pads for sale to other company divisions as well as to outside entities. Corporate management treats Krusty as a profit center. The normal selling price for a pair of Krusty's brake pads is $12; costs for each pair are: Direct material Direct labor Variable overhead Fixed overhead (based on production of 700,000 pairs) Variable selling $1.50 1.90 0.80 2.75 0.50 Another division of Bart, the Wiggum Trailer Division, wants to purchase 25,000 pairs of brake pads from Krusty during the next year. No selling costs are incurred on internal sales. a) Assume that Krusty is experiencing a slight slowdown in external demand and will be able to sell only 600,000 pairs of brake pads to outsiders next year at the $12 selling price. What should be the minimum selling price quoted to Wiggum? b) Refer to the original data. If Krusty's manager can sell all the brake pads it produces externally, what should the minimum transfer price be? c) Assume that the manager of Wiggum offers to pay Krusty's production costs plus 25% for each pair of brake pads. He receives an invoice for $217,187.50 and he was planning on a cost of $131,250. How were these amounts determined? What created the confusion?