Mack's Julces produces and bottles a line of frult Julces. The manufacturing process entalls mixing and adding Juices and other Ingredlents 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 heavly influences sales volume, Mack's developed a unique bottle production process at the company's container plant, which is a part of Packaging Division. Blending Division uses all of the container plant's 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 Dwision's general manager asked other bottle manufacturers to quote a price for the number and sizes demanded by Blending Division. These competitive prices follow: An equivalent case represents 24 bottles. Packaging DMislon's cost analysis indicates that it can produce bottles at these costs. These costs include fixed costs of $640,000 and varlable costs of $14.40 per equlvalent case. These data have caused considerable corporate discussion as to the proper price to use in the transfer of bottles from Packaging DMision to Blending Division. This interest is heightened because a significant portion of a division manager's income is an incentive bonus based on profit center results. Blending DMision has the followng costs in addition to the bottle costs: The corporate marketing group has furnished the following price-demand relationship for the fintshed product: Required: a. Mack's Julces has used market price-based 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 Jutces. b-1. Calculate operating profits for Packaging. Blending, and Mack's Julces for volumes of 100.000,200,000 and 300.000 cases. b-2. Which volume of productoon is the most profitable for Packaging. Blending. and Mack's Juces? Complete this question by entering your answers in the tabs below. Mack's Juices has used market price-based 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. Note: Enter your answers in thousands of dollars. Calculate operating profits for Packaging, Blending, and Mack's Juices for volumes of 100,000, 200,000 and 300,000 cases. Note: Enter your answers in thousands of dollars
