Ag-Coop is a large tarm cooperative with a number of agriculture-related manutacturing and service dvisions. As a cooperative, it pays no tederal income taxes. The company owns a tertilizer plant that processes and mixes petrochemical compounds into three brands of agricultural fertilizer greenup, maintane, and winterizer. The three brands differ with respect to selling price and the proportional content of basic chemical:s Ag-Coop's Fertilizer Manufacturing Division transfers the completed product to the cooperative's Retail Sales Division at a price based on the cost of each type of fertilizer plus a markup The Manutacturing Division is completely automated so that the only costs it incurs are the costs of the petrochemical teedstocks plus overhead that is considered fxed. The primary teedstock costs $1.50 per pound. Each 100 pounds or feedstock can produce either of the following mixtures of fertilizer Output Schedules (in unds 50 30 20 Greenup 10 30 Winterizer Production is limited to the 750,000 kilowatt-hours monthly capacity of the dehydrator. Due to different chemical makeup, each brand of fertilizer requires dierent dehydrator use. Dehydrator usage in kilowatt-hours per pound of product Kilowatt-Hour Usage per Pound 32 20 40 Product Winterizer Monthly fixed costs are $81,250. The company currently is producing according to output schedule A. Joint production casts including fixed overhead are allocated to each product on the basis of weight. The fertil zer is packed into 100-pound bags for sale in the cooperative's retail stores. The sales price for each product charged by the cooperative's Retail Sales Division folloWS: Sales Price Pound 10.50 9.00 10.40 Wintenzer Selling expenses are 20 percent of the sales price The Retail Sales Division manager has complained that the prices charged by the Manufacturing Division are excessive and that he would prefer to purchase from another supplier. The Manufacturing Division manager argues that the processing mix was determined based on a careful analysis of the costs of each product compared to the prices charged by the Retail Sales Division