Alpha and Beta are divisions within the same company.
Req 1A to 1C Req 2A to 2D Req 3A to 3D Reg 4 1. Refer to case 1 shown above. Alpha Division can avoid $5 per unit in commissions on any sales to Beta Division. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer? Show less A Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price Highest acceptable transfer price Identify the range of acceptable transfer prices (if any): There is not a range of acceptable transfer prices. OThere is a range of acceptable transfer prices as shown below: S Transfer price S Will the managers agree to the trade? Yes ONOReq 1A to 1C Req 2A to 2D |Req 3A to 3D Req 4 2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $4 per unit in shipping costs on any sales to Beta Division. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? c. What is the range of acceptable transfer prices (if any) 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 offers to sell 66,000 units to Beta Division for $38 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole? Show less A Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price Highest acceptable transfer price Identify the range of acceptable transfer prices (if any): There is not a range of acceptable transfer prices. There is a range of acceptable transfer prices as shown below: S Transfer price S Will the managers agree to the trade? OYes ONo Loss in potential profits for the companyReq 1A to 1C Req 2A to 2D |Req 3A to 3D Req 4 3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 5% price discount from the outside supplier. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer? d. Assume Beta Division offers to purchase 19,000 units from Alpha Division at $55.80 per unit. If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged? (Round your final answers to 2 decimal places.) Show less A Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price Highest acceptable transfer price Identify the range of acceptable transfer prices (if any): There is not a range of acceptable transfer prices. There is a range of acceptable transfer prices as shown below: S Transfer price S Will the managers agree to the trade? OYes No Division A's ROI should OIncrease DecreaseComplete this question by entering your answers in the tabs below. Req 1A to 1C Req 2A to 2D Req 3A to 3D Red 4 Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 56,000 units of a different product from the one Alpha Division is producing now. The new product would require $28 per unit in variable oosts and would require that Alpha Division cut back production of its present product by 28,000 units annually. What is Alpha Division's lowest acceptable transfer price? ShowI less; Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division's return on investment {ROI}. Assume the following information relative to the two divisions: Case 1 Z 3 4 Alpha Division: Capacity in units 55,888 383,888 165,888 197,888 Number of units nowI being sold to outside customers 55,888 363,888 81,888 197,888 Selling price per unit to outside customers $ 9? 5 48 $ 54 3: 4-6 Variable costs per unit $ 61 $ 28 $ 39 5 32 Fixed costs per unit (based on capacity) 35 22 5 E 5 23 5 6 Beta Division: Number of units needed annually 9,408 66,888 19,868 56,808 Purchase price now being paid to an outside supplier $ 89 5 3'3 5 64' | *Elefore any purchase discount Required: 1. Refer to case 1 shown above. Alpha Division can avoid $5 per unitin commissions on any sales to Beta Division. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? c. What is the range of acceptable transfer prices [if any} between the two divisions? Will the managers probany agree to a transfer? 2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $4 per unit in shipping costs on any sales to Beta Division. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? c. What is the range of acceptable transfer prices [if any} 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 offers to sell 66,000 units to Beta Division for $38 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole? 3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 5% price discount from the outside supplier. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? c. What is the range of acceptable transfer prices [if any} between the two divisions? Will the managers probably agree to a transfer? d. Assume Beta Division offers to purchase 19,000 units from Alpha Division at $55.80 per unit If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged? 4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 56,000 units of a different product from the one Alpha Division is producing now. The new product would require $28 per unit in variable costs and would require that Alpha Division cut back production of its present product by 28,000 units annually. What is Alpha Division's lowest acceptable transfer pnce
