Stirton Industries is a decentralized company that evaluates its divisions based on ROI.
Division R has the capacity to make 10,000 units of a product. Division R's variable costs are $60 per unit.
Division J can use the product as a component in one of its products. Division J would incur $40 of variable costs to convert the component into its own product, which sells for $200.
The following requirements are independent of each other.
a. Division R can sell all that it produces for $120 each. Division J needs 1,000 units. What is the correct transfer price?
b. Division R can sell 8,000 units at $150 each. Any excess capacity will be unused unless the units are purchased by the J division, which could use up to 1,000 units. Determine the floor and ceiling of the bargaining range.

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The Answer of Stirton Industries is a decentralized company that evaluates its divisions based on ROI.
Division R has the capacity to make 10,000 units of a product. Division R's variable costs are $60 per unit.
Division J can use the product as a component in one of its products. Division J would incur $40 of variable costs to convert the component into its own product, which sells for $200.
The following requirements are independent of each other.
a. Division R can sell all that it produces for $120 each. Division J needs 1,000 units. What is the correct transfer price?
b. Division R can sell 8,000 units at $150 each. Any excess capacity will be unused unless the units are purchased by the J division, which could use up to 1,000 units. Determine the floor and ceiling of the bargaining range.

Stirton Industries Is a Decentralized Company That Evaluates Its Divisions