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 processing division, and the juice is sold to large beverage companies that produce cranberry juice blends. The processing division has a yield of 2,000 litres of juice per 1,000 kilograms of cranberries. Cost and market price data for the two divisions are as follows:

REQUIRED:

REQUIRED #2:

Which transfer-pricing method will each division manager prefer? How might Cranfuel resolve any conflicts that may arise on the issue of transfer pricing?

Processing Division Variable processing cost per litre of juice $ 0.1500 produced $ 0.18 per litre Harvesting Division Variable cost per kilogram of Cranberries Fixed cost per kilogram of cranberries Selling price per kilogram of cranberries $ 0.20 Fixed cost per litre of juice produced $ 0.37 per litre $ 0.55 Selling price per litre of juice produced $ 2.20 per litre Requirement 2. Cranfuel rewards its division managers with a bonus equal to 4% of operating income. Compute the bonus earned by each division manager in June 2015 for each transfer pricing method, (a) 250% of costs and (b) market price. (Round the revenue per kilogram to four decimal places. Round final answers to the nearest whole dollar. If the bonus is negative, enter a zero, since no bonus would be paid. Use a minus sign or parentheses for any operating losses.) 250% of Full Costs Market Price Harvesting Division: Revenues Costs Division variable costs Division fixed costs Total Division costs Division operating income Division manager's bonus