Down Under Corporation, based in Melbourne, Australia, has two operating divisions, an amusement park in Sydney and a hotel in Brisbane. The two divisions meet the Australian requirements for segment disclosures. Before transactions between the two divisions are considered, revenues and costs were as follows (in thousands of Australian dollars):

Hotel Amusement Park ROVENU Gs tos ca stuns cone wae $22,400 $14,800 GosiSs) BAe meanc ens 12,400 10,000 The amusement park and the hotel had a joint marketing arrangement by which the hotel gave free passes to the amusement park and the amusement park gave discount coupons good for stays at the hotel.

The value of the free passes to the amusement park redeemed during the past year totaled $3,200,000.

The discount coupons redeemed at the hotel resulted in a $1,200,000 decrease in hotel revenues. As of the end of the year, all current year coupons have expired.

Required

a. Is there a transfer-pricing issue in this exercise? Explain.

b. What are the operating profits for each division, considering the effects of the costs arising from the joint marketing agreement?