1. Galaxy Corp manufactures high end telescopes and has two divisions: Assembly and Finishing. The Assembly division manufactures lenses that can be sold immediately after assembly for $900 or can be process further in the Finishing Division. After work is completed in the Finishing Division, the Finished Telescopes sell for $1,200 per unit. Financial results from the most recent period are as follows:

	Assembly Division			Finishing Division
Variable manufacturing costs	$	650			$	200
Fixed manufacturing costs	$	50			$	50
External sales price	$	900			$	1,200

1. Using a transfer price based on total manufacturing costs prepare Operating Income Statements for each Division: Assembly and Finishing.
2. Using a market-based transfer price prepare Operating Income Statements for each Division: Assembly and Finishing.
3. For Galaxy Corp. (total company perspective) which transfer price option (cost-based or market based) is preferred? Why is this method preferred?