Mack's Juices produces and bottles a line of fruit juices. The manufacturing process entails mixing and adding juices and other ingredients at the bottling plant, which is a part of Blending Division. The finished product is packaged in a company-produced glass bottle and packed in cases of 24 bottles each.

Because the appearance of the bottle heavily influences sales volume, Mack's developed a unique bottle production process at the companys container plant, which is a part of Packaging Division. Blending Division uses all of the container plants production. Each division (Blending and Packaging) is considered a separate profit center and evaluated as such. As the new corporate controller, you are responsible for determining the proper transfer price to use for the bottles produced for Blending Division.

At your request, Packaging Divisions general manager asked other bottle manufacturers to quote a price for the number and sizes demanded by Blending Division. These competitive prices follow:

Volume	Total Price	Price per Case
100,000 equivalent casesa	$ 2,670,000	$ 26.70
200,000	4,770,000	23.85
300,000	6,390,000	21.30

^a An equivalent case represents 24 bottles.

Packaging Divisions cost analysis indicates that it can produce bottles at these costs.

Volume	Total Cost	Cost per Case
100,000 equivalent cases	$ 2,395,000	$ 23.95
200,000	4,105,000	20.53
300,000	5,815,000	19.38

These costs include fixed costs of $685,000 and variable costs of $17.10 per equivalent case. These data have caused considerable corporate discussion as to the proper price to use in the transfer of bottles from Packaging Division to Blending Division. This interest is heightened because a significant portion of a division managers income is an incentive bonus based on profit center results.

Blending Division has the following costs in addition to the bottle costs:

Volume	Total Cost	Cost per Case
100,000 equivalent cases	$ 1,860,000	$ 18.60
200,000	2,460,000	12.30
300,000	4,080,000	13.60

The corporate marketing group has furnished the following pricedemand relationship for the finished product:

Sales Volume	Total Sales Revenue	Sales Price per Case
100,000.00 equivalent cases	$ 6,510,000	$ 65.10
200,000.00	11,820,000	59.10
300,000.00	15,030,000	50.10

Required:

a. Mack's Juices has used market pricebased transfer prices in the past. Using the current market prices and costs and assuming a volume of 300,000 cases, calculate operating profits for the Packaging Division, Blending Division, and Mack's Juices.

b-1. Calculate operating profits for Packaging, Blending, and Mack's Juices for volumes of 100,000, 200,000 and 300,000 cases.

b-2. Which volume of production is the most profitable for Packaging, Blending, and Mack's Juices?

\begin{tabular}{|l|l|} \hline Profits for Packaging Division & \\ \hline Profits for Blending Division & \\ \hline Profits for Mack's Juices & \\ \hline \end{tabular} \begin{tabular}{|l|c|c|c|} \hline & 100,000cases & 200,000cases & 300,000cases \\ \hline Packaging profit & & & \\ \hline Blending profit & & & \\ \hline Mack's Juices profit & & & \\ \hline \end{tabular} Which volume of production is the most profitable for Packaging, Blending, and Mack's Juices