Cranfuel 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 ProcessingDivision, and the juice is sold to large beverage companies that produce cranberry juice blends. The Processing Division has a yield 2,200 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 kg cranberries $ 0.1400

Fixed cost per kg of cranberries $ 0.35

selling price per kg of cranberries $ 0.58

Processing Division:

Variable processing cost per litre of juice produced $ 0.32 per litre

Fixed cost per litre of juice produced $ 0.47 per litre

Selling price per litre of juice produced $ 2.45 per litre

1.	Compute lCranfuel's operating income from harvesting 380,000 kilograms of cranberries during June 2013 and processing them into juice.
2.	Cranfuel rewards its division managers with a bonus equal to 3% of operating income. Compute the bonus earned by each division manager in June 2013 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 lCranfuel resolve any conflicts that may arise on the issue of transfer pricing?