Refer to the data in Problem 15-26. Division managers are evaluated using residual income using a 15 percent cost of capital.
Required
a. What is the residual income for Spartan without the transfer to Trojan?
b. What is Spartan’s residual income if it transfers 100,000 units to Trojan at $16 each?
c. What is the minimum transfer price for the 100,000-unit order that Spartan would accept if it were willing to maintain the same residual income with the transfer as it would accept by selling its 450,000 units to the outside market?