Pierce Company has two divisions: Pierce Bottles and Pierce Juice. Pierce Bottles makes glass containers, which it sells to Pierce Juice and other companies. Pierce Bottles has a capacity of 10 million bottles a year. Pierce Juice currently has a capacity of 3 million bottles of juice per year. Pierce Bottles has a fixed cost of $100,000 per year and a variable cost of $0.01/bottle. Pierce Bottles can currently sell all its output at $0.03/bottle.

• What should Pierce Bottles charge Pierce Juice for bottles so that both divisions will make appropriate decentralized planning decisions?
• If Pierce Bottles can only sell 5 million bottles to outside buyers, what should Pierce Bottles charge Pierce Juice for bottles so that both divisions will make appropriate decentralized planning decisions?