LO 2.a. Harvesting division operating income is $139,998 22-31 Effect of alternative transfer-pricing methods on division operating income. Crango 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 1,900 litres of juice per 1,000 kilograms of cranberries. Cost and market price data for the two divisions are as follows: 1 Harvesting Division B D Processing Division E Variable processing cost per litre of juice produced $0.05263 per litre Fixed costs per litre of juice produced 0.1053 per litre 2 Variable costs per kilogram of cranberries $0.2205 3 Fixed cost per kilogram of cranberries 4 Selling price per kilogram of cranberries 0.5511 1.3228 Selling price per litre of juice 0.55263 per litre Required 1. Compute Crango's operating income from harvesting 181,440 kilograms of cranberries during June and processing them into juice. 2. Crango rewards its division managers with a bonus equal to 5% of operating income. Compute the bonus earned by each division manager in June 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 Crango resolve any con- flicts that may arise on the issue of transfer pricing?