Alava 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 $170 per unit. The mining division is currently required by Alava to transfer its total early output of 245,000 units of toldine to the metals division at 110% of full manufacturing cost. Unlimited quantities of toldine can be purchased and sold on the outside market at $85 per unit.

The following table gives the manufacturing cost per unit in the mining and metals divisions for the year:

Alava Corporation has two divisions. The mining division makes toldine, which is then transferred to the metals divis $170 per unit. The mining division is currently required by Alava to transfer its total yearly output of 245,000 units of can be purchased and sold on the outside market at $85 per unit. The following table gives the manufacturing cost per unit in the mining and metals divisions for the year: Eint (Click to view the data) Reauired Requirement 1. Calculate the operating incomes for the mining and metals divisions for the 245,000 units of toldine manufacturing cost. Begin with calculating the operating income for the mining division under each method by entering the appropriate Data table "Manutacturing overhead costs in the mining division are 20% fixed and 80% variable. variable. 1. Calculate the operating incomes for the mining and metals divisions for the 245,000 units of toldine transferred under the following transfer-pricing methods: (a) market price and (b) 110% of full manufacturing cost. 2. Suppose Alava rewards each division manager with a bonus, calculated as 3% of division operating income (if positive). What is the amount of bonus that will be paid to each division manager under the transfer-pricing methods in requirement 1? Which transfer-pricing method will each division manager prefer to use? 3. What arguments would Braden Jones, manager of the mining division, make to support the transfer-pricing method that he prefers? The lollowing table gives the mahtacturing coet per ust in the mining and methes dvisions for the veat fCllak to view the data ) inseusacturing cost