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Requirements Data table 1. Compute Crangood's operating income from harvesting 450,000 pounds of cranberries during June 2020 and processing them into juice. 2. Crangood rewards
Requirements Data table 1. Compute Crangood's operating income from harvesting 450,000 pounds of cranberries during June 2020 and processing them into juice. 2. Crangood rewards its division managers with a bonus equal to 2% of operating income. Compute the bonus earned by each division manager in June 2020 for each of the following transfer-pricing methods: a. 150% of full cost b. Market price 3. Which transfer-pricing method will each division manager prefer? How might Crangood resolve any conflicts that may arise on the issue of transfer pricing? Requirement 1. Compute Crangood's operating income from harvesting 450,000 pounds of cranberries during June 2020 and processing them into juice. Revenues 495000 Costs Harvesting divison Variable costs Fixed costs 13500112500 Total harvesting division costs 126000 Processing divsion Variable costs Fixed costs 56250162000 Total processing division costs Total costs Operating income \begin{tabular}{|r|} \hline 218250 \\ \hline 344250 \\ \hline 150750 \\ \hline \end{tabular} pound to the nearest cent. Round final answers to the nearest whole dollar.) Requirement 3 . Which transfer-pricing method will each division manager prefer? How might Crangood resolve any conflicts that may arise on the issue of transfer pricing The harvesting division manager will prefer to transfer at The processing division manager will prefer to transfer at Crangood may resolve or reduce transfer pricing conflicts by: A. Using dual transfer prices since it does not benefit the company to have the harvesting division control costs since they do not produce the end product. B. Basing division managers' bonuses on overall Crangood profits in addition to division operating income. C. Requiring the two divisions to negotiate the transfer price between themselves every accounting period. D. None of the above
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