0 Problem 11A-6 Basic Transfer Pricing [L011-5] Alpha and Beta are divisions within the same company The managers of both divisions are evaluated based on their own division's Alpha Division Capacity in units Number of units now being sold to 55,909 32.11,0 198,80 55,080 e2,80085,000 198,eee 61$46 outside custoners Selling price per unit to outside 97 45 $ 58, 23 Variable cests per unit rixed costs per unit (based on 34% 29 capacity) Beta 0svssion Nunber of units needed annually Purchase price now being paid to 1e,38067,00 19,0e8 s8.8ee $ 91 46$ 61. en eutside suppller "Before any purchase discount Managers are free to decide if they will participate in any intermal transfers. All transfer prices are negotiated Required 1 Refer to case 1 shown above. Alpha Division can avoid $4 per unit in commissions on any sales to Beta Division b. What is the highest acceptable transfer price from the perspective of the Beta Division? c What ts the range of acceptable transfer prices lif any) between the two divisions Will the managers probably agree to a transfer? commissions on an t is the lowest acceptable transter price from the perspective of the Alpha Division? Sa a What is the lowest cceptable sansteoc 2 Reter to case 2 shown above A study indicates that Alpha Division can avoid $3 per unit in shipping costs on any sales to Beta Division s the lowest acceptable transfer price from the perspective of the Alpha Division? b. What is the highest acceptable transfer price from the perspective of the Bela Division? c What is the range of acceptable transfer prices (if anyl between the two divisions? Would you expect any disagreement between the two divisional managers over what the exact transfer price should be? d. Assume Alpha Division be the loss in potential profits for the company as a whole? ofters to sell 67000 units to Beta Division for $45 per unit and that Beta Division refuses this price What w 3 Reter to case 3 shown above. Assume tha t Beta Division is now receiving an 4% price discount from the outside suppler a What is the lowest acceptable transfer price from the perspective of the ANlpha Diviskon? b. What is the highest acceptable transfer price from the perspective of the Beta Division? c What is the range of acceptable transfer prices f any) between the two divisions? d Assume Beta Division offers to purchase 19000 units from Alpha Division at 553 56 per unit. If Alpha Division would you expect its ROl to increase. decrease, or remain unchanged? Will the managers probably agree to a transfer? accepts this price to case 4 shown above Assume that Bela Division wants Alpha Dwision to provide it with 53 000 units of a different Alpha thison cut back production of its present Product by urits annually what is the lowest acceptable tran se p ce trom the one Alpha Division is producing now The new product would require $23 per unit in variabie costs and would require that Alpha Division s perspective? Complete this question by entering your answers in the tabs below. Reg 1A to 1C | Req 2A to 20 Req 3A tu 301 Req 4 per unit in comimissions on any salas to Beta Division, a what is the lowest acceptable transfer prCA from the perspective of the Alpha Division? C: what is the range of accaptable transter prices of any) between the two divialana wih price from the perspective of the eta Division? c What is the range of acceptable transfer prices of anv) between the two divisians? will the managers protably agrea to a Show less& the loweut and highest accaptatie transler prices Lowest acceptalde Iransfer price identily Sie tange of accable trander prices Of an Thase is sct range of accag abls tansfer prices Type here to search