Burdeno Appliances has two divisions, Sales and Financing. Sales is responsible for selling Burdeno's inventory and maintaining

inventory for future sale. Financing Division takes loan applications, packages loans into pools, and sells them in the financial markets.

It also services the loans. Both divisions meet the requirements for segment disclosures under accounting rules.

Sales Division had $$19$ million in sales last year. Costs, other than those charged by Financing Division, totaled $$17$ million. Financing

Division earned revenues of $$3\mathrm{.}6$ million from servicing loans and incurred outside costs of $$4\mathrm{.}1$ million. In addition, Financing charged

Operations $$900,000$ for loan$-$related fees. Sales' manager complained to corporate that Financing was charging $150$ percent of the

commercial rate for loan$-$related fees and that Sales would be better off sending its buyers to an outside lender.

Financing's manager replied that although commercial rates could be lower, servicing these loans is more difficult, thereby justifying

the higher fees.

Required:

a$.$ What are the reported segment operating profits for each division, ignoring income taxes and using the $$900,000$ transfer price for

the loan$-$related fees?

b$.$ What are the reported segment operating profits for each division, ignoring income taxes and using a $$600,000(=$ $$900,000$

$150\%)$ commercial rate as the transfer price for the loan$-$related fees?

Complete this question by entering your answers in the tabs below.

What are the reported segment operating profits for each division, ignoring income taxes and using the $$900,000$ transfer

price for the loan$-$related fees?

Note: Enter your answers in thousands.