Problem 4 (25%) Straw Co. is a strawberry cooperative that operates two divisions, a harvesting division and a processing division. Currently, all of harvesting's output is converted into strawberry juice by the processing division, and the juice is sold to large beverage companies that produce strawberry juice blends. The processing division has been approached by outside supplier for 1.05/pound. The processing division has a yield of 1,000 gallons of juice per 1,250 pounds of strawberries. Cost and market price data for the two divisions are as follows: Required 1. Compute minimum and maximum transfer price per pound of strawberries. (2%) 2. Referring to Requirement 1, does internal transfer will take place? Explain! (1%) 3. Compute Straw Co's operating income from harvesting 500,000 pounds of strawberries during June 2021 and processing them into juice using regardless transfer price (using market price). (8%) 4. Straw Co rewards its division managers with a bonus equal to 5% of operating income. Compute the bonus earned by each division manager in June 2021 for each of the following transfer pricing methods: (10%) a. 150% of full cost b. Market price
