Transfer pricing methods, goal congruence. British Columbia Lumber has a Raw Lumber Division and a Finished Lumber Division. The variable costs are: Raw Lumber Division: $100 per 100 board-feet of raw lumber Finished Lumber Division: $125 per 100 board-feet of finished lumber Assume that there is no board-feet loss in processing raw lumber into finished lumber. Raw lumber can be sold at $200 per 100 board-feet. Finished lumber can be sold at $275 per 100 board-feet. REQUIRED 1. Should British Columbia Lumber process raw lumber into its finished form? Show calculations. your 2. Assume that internal transfers are made at 110% of variable cost. Will each division maxi- mize its division operating-income contribution by adopting the action that is in the best interests of British Columbia Lumber as a whole? Explain. 3. Assume that internal transfers are made at market prices. Will each division maximize its division operating-income contribution by adopting the action that is in the best interests of British Columbia Lumber as a whole? Explain.

LO1