PLEASE EXPLAIN PART B ON HOW TO FIND PRORATED TRANSFER PRICE

INFORMATION:

$23-18$ TRANSFER PRICE, PRORATION.$$Chocfix produces hot cocoa mix. The company has two divisions, each operating as a profit center. The transportation division purchases raw cocoa in the Ivory Coast and transports it to the mixing division in Atlanta, Georgia. The mixing division processes the raw cocoa into the cocoa mix. It takes two pounds of raw cocoa to yield one pound of cocoa mix. Variable and fixed costs per pound of raw cocoa in the transportation division and variable and fixed costs per pound of cocoa mix in the mixing division area as follows:

Transportation Division $($picture attached$)$

Mixing Division:

Variable mixing costs per pound of coacoa mix $$4$

Fixed Mixing costs per pound of coacoa mix $$4$

The market price for a pound of raw cocoa supplied to the mixing division in Atlanta is $$14.$ Chocfix can sell each pound of hot cocoa mix for $$42$

Minimum Transfer Price: $11$

Maximum Transfer Price: $14$

QUESTION $--------$

Leila Brown, Chocfix$$s CFO, disagrees with James Ladell$$s suggestion to split the difference evenly. She argues that the difference between the maximum and minimum transfer price should be prorated based on the value of the work contributed by each of the divisions to the final product

a$.$What is the value of the work contributed by each of the divisions towards a pound of cocoa mix? Ignore fixed costs

$**$b$.$What is the transfer price if the difference between the maximum and the minimum transfer price $($identified in requirement $1)$ is prorated based on the relative value of the work contributed by each of the divisions $($identified in requirement $3$a$)?$ What is the contribution margin per pound of raw cocoa for the transportation division? What is the contribution margin per pound of cocoa mix for the mixing division?