Cran Benefit Products is a cranberry cooperative that operates two divisions: a harvesting division and a processing division. Currently, all of harvesting's output is converted into cranberry juice by the processing division, and the juice is sold to large beverage companies that produce cranberry juice blends. The processing division has a yield of 1,900 litres of juice per 1,000 kilograms of cranberries. Cost and market price data for the two divisions are as follows:

Harvesting Division

Variable cost per kilogram of cranberries

$0.1400

Fixed cost per kilogram of cranberries

$0.20

Selling price per kilogram of cranberries

$0.72

Processing Division

Variable processing cost per litre of juice produced

$0.32

per litre

Fixed cost per litre of juice produced

$0.35

per litre

Selling price per litre of juice produced

$1.85

per litre

Required:

1.	Compute Cran Benefit's operating income from harvesting 460,000 kilograms of cranberries during June2015 and processing them into juice.
2.	Cran Benefit rewards its division managers with a bonus equal to 66% of operating income. Compute the bonus earned by each division manager in June 2015 for each of the following transfer-pricing methods:
	a.	200% of full cost
	b.	Market price
3.	Which transfer-pricing method will each division manager prefer? How might Cran Benefit resolve any conflicts that may arise on the issue of transfer pricing?