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QUESTION 5 (20 Marks) Malek Health Products is a ginger juice producer that operates two divisions, a harvesting division and a processing division. Currently, all
QUESTION 5 (20 Marks) Malek Health Products is a ginger juice producer that operates two divisions, a harvesting division and a processing division. Currently, all of harvesting's output is converted into ginger juice by the processing division, and the juice is sold to large beverage companies that produce ginger juice blends. The processing division has a yield of 500 liter of juice per 1,000 kilograms of ginger. Cost and market price data for the two divisions are as follows: Harvesting Division Processing Division Variable cost per kilogram of ginger RM0.10 Variable processing cost per litre of RM0.18 juice produced Fixed cost per kilogram of ginger RM0.30 Fixed cost per litre of juice RM0.35 produced Selling price per kilogram of ginger in RM0.68 Selling price per litre of juice RM2.45 outside markets REQUIRED: a. Compute Malek Health's operating income from harvesting 480,000 kilograms of ginger during June 2019 and processing them into juice. [6 marks] b. Malek Health rewards its division managers with a bonus equal to 6% of operating income. Compute the bonus earned by each division manager in June 2019 for each of the following transfer-pricing methods: i. 225% of full cost ii. Market price [14 marks]
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