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 2 3 4 Alpha Division: Capacity in units 80,000 400,000 150,000 300,000 Number of units now being sold to outside customers 80,000 400,000 100,000 300,000 Selling price per unit to outside customers $ 30 $ 90 $ 75 $ 50 Variable costs per unit $ 18 $ 65 $ 40 $ 26 Fixed costs per unit (based on capacity) $ 6 $ 15 $ 20 $ 9 Beta Division: Number of units needed annually 5,000 30,000 20,000 120,000 Purchase price now being paid to an outside supplier $ 27 $ 89 $ 75* *Before any purchase discount. Required: 1. Refer to case 1 shown above. Alpha Division can avoid $2 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? 2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $5 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 30,000 units to Beta Division for $88 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole? Next