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 company calculated the operating income and the corresponding division$$ managers' bonuses when $400$ comma $000$ pounds of cranberries are harvested and processed into juice under two different transfer pricing$$ methods: Assume that Pat$$ Borges, CEO of Cranfuel$,$ had mandated a transfer price equal to $175\%$ of full cost. Now he decides to decentralize some management decisions and sends around a memo that$$ states: "Effective$$ immediately, each division of Cranfuel is free to make its own decisions regarding the purchase of direct materials and the sale of finished$$ products." $1.$

Give an example of a$$ goal$-$congruence problem that will arise if Cranfuel continues to use a transfer price of $175\%$ of full cost and$$ Borges's decentralization policy is adopted.

$2.$

Borges feels that a dual$$ transfer$-$pricing policy will improve goal congruence. He suggests that transfers out of the harvesting division be made at $175\%$ of full cost and transfers into the processing division be made at market price. Compute the operating income of each division under this dual$$ transfer$-$pricing method when $400$ comma $000$ pounds of cranberries are harvested during June $2020$ and processed into juice.

$3.$

Why is the sum of the division operating incomes computed in requirement $2$ different from Cranfuel$\text{'}$s operating income from harvesting and processing $400$ comma $000$ pounds of$$ cranberries?

$4.$

Determine two problems that may arise if Cranfuel implements the dual transfer prices described in requirement $2.$