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Bedtime Bedding Company manufactures pillows. The Cover Division makes covers and the Assembly Division makes the finished products. The covers can be sold separately for

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Bedtime Bedding Company manufactures pillows. The Cover Division makes covers and the Assembly Division makes the finished products. The covers can be sold separately for $5.00 per unit. The pillows sell for $6.00 per unit. The information related to manufacturing for the most recent year is as follows: Cover division costs $6,200,000 Sales of covers by cover division $4,200,000 Market value of covers transferred to assembly $6,200,000 Sales of pillows by assembly division $7,200,000 Additional manufacturing costs of assembly division $1,800,000 Required: a. Compute the operating income for each division and the company as a whole. Use market value as the transfer price. b. Are all managers happy with this concept? Explain. Is it justifiable to use market price as transfer price? Explain. c

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