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. The pillows sell for $6.00. The information related to manufacturing for the most recent year is as follows:

Cover Division manufacturing costs	$6,000,000
Sales of covers by Cover Division	$4,000,000
Market value of covers transferred to Assembly	$6,000,000
Sales of pillows by Assembly Division	$7,200,000
Additional manufacturing costs of Assembly Division	$1,500,000

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.

c. Is it justifiable to use market price as transfer price? Explain.