Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 (ROl).

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

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 (ROl). Assume the following information relative to the two divisions: Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. 1. Refer to case 1 shown above. Alpha Division can avold $2 per unit in commissions on any sales to Beta Division. a. What is Alpha Divislon'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? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. 2. Refer to case 2 shown above. A study indicates that Alpha Division can avold $5 per unit in shipping costs on any sales to Beta Division. a. What is Alpha Divislon'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 319,000 units to Beta Division for $126 per unit and that Beta Division refuses this price. What will be the loss In potential profits for the company as a whole? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. 3. Refer to case 3 shown above. Assume that Beta Division is now recelving an 8% price discount from the outside supplier. a. What is Alpha Divislon'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? WIII the managers probably agree to a transfer? d. Assume Beta Dlvision offers to purchase 39,000 units from Alpha Dlvision at $60 per unit. If Alpha Dlvision accepts this price, would you expect its ROI to Increase, decrease, or remain unchanged? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. 4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 123,800 units of a different product from the one Alpha Division is producing now. The new product would require $59 per unit in variable costs and would require that Alpha Division cut back production of its present product by 46,425 units annually. What is Alpha Division's lowest acceptable transfer price

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions

Question

10. List three reasons for creating a logical data flow diagram.

Answered: 1 week ago

Question

What are the key elements of facial display?

Answered: 1 week ago