Darselect Strawberry manufactures bottles in its glass Division A, which are then transferred to its packaging Division B. In the upcoming month, 270,000 bottles will be transferred to Division B from Division A, where they are filled and then sold at $7.40 per bottle. The bottles can be sold from Division A to other bottlers at $5.60 per bottle. The costs provided relate to total manufacturing budgeted costs for the 270,000 bottles. (Click the icon to view the costs data.) The operating income for Division A and Division B under the market price transfer-pricing method are provided in the accompanying tables. (Click the icon to view the division operating income.) The manager of Darselect Strawberry has just come back from a transfer-pricing conference where he learned about new methods. Required Costs data Total variable costs $ Total fixed costs Total costs Division A Division B 89,100 $ 78,300 225,000 145,800 69 $ 314,100 $ 224,100 Print Done Division operating income Revenue Transferred-in costs Variable costs Fixed costs Division operating income Revenue Variable costs Division B $ 1,998,000 (1,512,000) (78,300) (145,800) 261,900 Division A $ 1,512,000 (89,100) Fixed costs (225,000) $ 1,197,900 Division operating income Print Done Required 1. Calculate the operating income for Division A using 110% of manufacturing cost as the transfer price. 2. Calculate the operating income for Division A using 110% of market value cost as the transfer price. 3. If bonuses are calculated at 10% of operating income, what method will the manager of Division A prefer (market value or 110% of manufacturing cost)? 4. Comment on the 110% of manufacturing costs compared to the $5.60 market value transfer price. What impacts on behaviours or attitudes might occur within divisions if the company switches from market value to 110% of manufacturing cost? Print Done Requirement 1. Calculate the operating income for Division A using 110% of manufacturing cost as the transfer price. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for a negative operating income.) Revenue Variable costs Fixed costs Division operating income Division A Requirement 2. Calculate the operating income for Division A using 110% of market value cost as the transfer price. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for a negative operating income.) Revenue Variable costs Fixed costs Division operating income Division A Requirement 3. If bonuses are calculated at 10% of operating income, what method will the manager of Division A prefer (110% of market value or 110% of manufacturing cost)? The manager of Division A would prefer the 110% of method because the division operating income would be with this method. Requirement 4. Comment on the 110% of manufacturing costs compared to the $5.60 market value transfer price. What impacts on behaviours or attitudes might occur within divisions if the company switches from market value to 110% of manufacturing cost? The 110% of manufacturing cost transfer price is due to a operating income or method. The the $5.60 market value transfer price under the market value method. Division B could see a in morale emphasis on minimizing costs and improving revenues as the division would look due to changing to the market value might happen with Division A if the market value method is used. Division A may decide to