Amax 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 $180 per unit. The mining division is currently required by Amax to transfer its total yearly output of 255,000 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 $95 per unit. The following table gives the manufacturing cost per unit in the mining and metals divisions for the year: (Click to view the data.) Required Requirement 1. Calculate the operating incomes for the mining and metals divisions for the 255,000 units of toldine transferred under the following transfer-pricing methods: (a) market price and (b) 110% of full manufacturing cost. Begin with calculating the operating income for the mining division under each method by entering the appropriate amounts, and then complete the table for the metal division. Mining division Division revenue Cost: Division variable cost Division fixed cost Total division cost Division operating income Method A Method B Data table Mining Division Metals Division Direct material cost $17 Direct manufacturing labour cost 23 $16 30 Manufacturing overhead cost 30a 25b Total manufacturing cost per unit $70 $71 aManufacturing overhead costs in the mining division are 40% fixed and 60% variable. Manufacturing overhead costs in the metals division are 80% fixed and 20% variable. - Required 1. Calculate the operating incomes for the mining and metals divisions for the 255,000 units of toldine transferred under the following transfer-pricing methods: (a) market price and (b) 110% of full manufacturing cost. 2. Suppose Amax rewards each division manager with a bonus, calculated as 2% 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? -