Segment Reporting: Ticky Tacky Home Builders, Inc., has a building division and a financing division. The building division oversees construction of single-family homes in "economically efficient" subdivisions. The financing division takes loan applications and packages mortgages into pools and sells them in the loan markets. The financing division also services the mortgages. Both divisions meet the requirements for segment dis- closures under accounting rules. The building division had $31 million in sales last year. Costs, other than costs charged by the finance division, totaled $26 million. The financing division obtained revenues of $6 million from servicing mortgages and incurred outside costs of $7 million. In addition, the financing division charged the building division $4 million for loan-related fees. The manager of the building division complained to the CEO of Ticky Tacky stating that the financing division was charging twice the commercial rate for loan-related fees and that the building division would be better off sending its buyers to an outside lender. The financing division manager stated that although commercial rates might be lower, it was more difficult to sell Ticky Tacky houses, and therefore, the higher fees were justified.

Required:

a. What are the reported segment operating profits for each division ignoring income taxes, using the $4 million transfer price for the loan-related fees.

b. What are the reported segment operating profits for each division ignoring income taxes, using a $2 million commercial rate as the transfer price for the loan-related fees?