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Crango Products is a cranberry cooperative that operates two divisions: a harvesting division and a processing division. Currently, all of Harvestingâ€™s output is converted into cranberry juice by the processing division, and the juice is sold to large beverage companies that produce cranberry juice blends. The processing division has a yield of 1,900 litres of juice per 1,000 kilograms of cranberries. Cost and market price data for the two divisions are as follows:

Required:
1. Compute Crangoâ€™s operating income from harvesting 181,440 kilograms of cranberries during June 2015 and processing them into juice.
2. Crango rewards its division managers with a bonus equal to 5% of operating income. Compute the bonus earned by each division manager in June 2015 for each of the following transfer-pricing methods:
a. 200% of full cost
b. Market price
3. Which transfer-pricing method will each division manager prefer? How might Crango resolve any conflicts that may arise on the issue of transfer pricing?

A В Harvesting Division 2 Variable costs per kilogram of cranberries $0.2205| 3 Fixed cost per kilogram of cranberries Selling price per kilogram of cranberries 1 Processing Division | Variable processing cost per litre of juice produced Fixed costs per litre of juice produced Selling price per litre of juice $0.05263 per litre 0.1053 per litre 0.55263 per litre 0.5511 4 1.3228