Transfer pricing

The Bat Division of Baseball Company has just revised its actual cost data for 2001. Bat Division plans to transfer 50,000 units of its goods to the Sport Division. Sport Division can buy the same goods in the open market for $122 each. Bats new cost data are:

Direct materials $40 Direct labor 30 Variable overhead 10 Fixed overhead 16 Variable selling expenses 6 Fixed selling and administrative expenses 12 Total costs $106 Desired return 20 Sales price $126 Current production is 200,000 units, and the Bat Division has a capacity of 300,000 units.

Required: a. What is the lowest price the Bat Division should charge for the internal transfers of its goods? b. What is the highest price the Sport Division should pay for the units?