30. (Appendix) Transfer Pricing Plymouth Plants, Inc., has two divisions-Retail and Nursery. The Retail division sells plants and supplies. The Nursery division takes tree seedlings and grows them to healthy young plants before selling the trees internally to the Retail division and to outside customers. Each division manager is evaluated based on profit produced by each division. The Nursery division sells its trees to the Retail division for $4 per tree to cover its variable costs. The Nursery division also sells to outside customers for $6 per tree. Required: a. Using the general economic transfer pricing rule, calculate the optimal transfer price assuming the Nursery division isbelow capacity. b. Using the general economic transfer pricing rule, calculate the optimal transfer price assuming the Nursery division isat capacity. Exercises: Set B 31. Segmented Net Income.Valdez Company has two divisions-Appliances and Tools. The following Sales Division Services Division Income statement: Sales Cost of sales Gross margin Allocated overhead (from corporate) Marketing expenses Administrative expenses Operating Income Income tax expense (30% rate) Net Income $ 900,000 490.000 $410,000 84,375 130,000 90.000 $ 105,625 31.688 $ 73.937 $ 700,000 390,000 $ 310,000 65,625 80,000 70,000 $ 94,375 28,313 $ 66,062 Balance sheet information: Average operating assets Non-Interest bearing current liabilities $ 800,000 180,000 $ 500,000 60,000 Percent cost of capital 10% 104