Aken Corporation has two divisions. The mining division makes toldine, which is then transferred to the metals division. The toldine is further processed by the metals division and is sold to customers at a price of $160 per unit. The mining division is currently required by Aken to transfer its total yearly output of 215,000 units of toldine to the metals division at 125% of full manufacturing cost. Unlimited quantities of toldine can be purchased and sold on the outside market at $80 per unit. The following table gives the manufacturing cost per unit in the mining and metals divisions for 2013: Data table Direct material cost Direct manufacturing labor cost Manufacturing overhead cost Total manufacturing cost per unit Mining Division Metals Divison $ 10 $ 8 12 22 50 30 (a) (b) $ 72 $ 60 (a) Manufacturing overhead costs in the mining division are 20% fixed and 80% variable. (b) Manufacturing overhead costs in the metals division are 50% fixed and 50% variable. Requirements 1. 2. 3. Calculate the operating incomes for the mining and metals divisions for the 215,000 units of toldine transferred under the following transfer-pricing methods: (a) market price and (b) 125% of full manufacturing cost. Suppose Aken rewards each division manager with a bonus, calculated as 3% of division operating income (if positive). What is the amount of bonus each division manager will receive under the transfer-pricing methods in requirement 1? Which transfer-pricing method will each division manager prefer to use? What arguments would Brian Jones, manager of the metals division, make to support the transfer-pricing method that he prefers?