Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their return on investment (RO). Assume the following information for the two divisions: Case Variable costs per unit Alpha Division: Capacity in units Number of units now being sold to outside customers Selling price per unit to outside customers 88,000 400,000 158,000 300.000 80,000 408,000 100,000 300,000 $46 $106 $115 $66 $34 $81 5.80 $42 Fixed Ixed costs per unit (based on capacity) $ 6 $ 15 5 20 59 Beta Divisions Number of units needed annually 13,000 38,000 28,000 121,608 Purchase price now being paid to an outside supplier 543 $105 $115. "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 agree to a transfer? 2. Refer to case 2 shown above. A study indicates 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 desions? 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 38,000 units to Beta Division for $104 per unit and Beta Division refuses this price. What will be the company's loss in potential profits? 3. Refer to case 3 shown above. Assume Beta Division is now receiving an 8% price discount from the outside supplier a. What is Alpha Division's lowest acceptable transfer price? 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 agree to a transfer? 2. Refer to case 2 shown above. A study indicates 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 38,000 units to Beta Division for $104 per unit and Beta Division refuses this price. What will be the company's loss in potential profits? 3. Refer to case 3 shown above. Assume Beta Division is now receiving an 8% 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 agree to a transfer? d. Assume Beta Division offers to purchase 28,000 units from Alpha Division at $100 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 Beta Division wants Alpha Division to provide it with 121,600 units of a different product from the one Alpha Division is producing now. The new product would require $37 per unit in variable costs and would require Alpha Division to cut back production of its present product by 45,600 units annually. What is Alpha Division's lowest acceptable transfera price? Complete this question by entering your answers in the tabs below. Required 1A to Required 2A to Required 3A to Required 4 20 30 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 agree to a transfer?