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 96,000 416,000 166,000 316,000 Number of units now being sold to outside customers 96,000 416,000 116,000 316,000 Selling price per unit to outside customers $ 62 $ 122 $ 155 $ 82 Variable costs per unit Fixed costs per unit (based on capacity) Beta Division: $ 50 $ 97 $ 120 $ 58 $ 6 $ 15 $ 20 $ 9 Number of units needed annually 21,000 46,000 36,000 123,200 Purchase price now being paid to an outside supplier $ 59 $ 121 $ 155* *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 46,000 units to Beta Division for $120 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 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 probably agree to a transfer? d. Assume Beta Division offers to purchase 36,000 units from Alpha Division at $140 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 123,200 units of a different product from the one Alpha Division is producing now. The new product would require $53 per unit in variable costs and would require that Alpha Division cut back production of its present product by 46,200 units annually. What is Alpha Division's lowest acceptable transfer price? Complete this question by entering your answers in the tabs below. Req 1A to 1C Req 2A to 2D Req 3A to 3D Req 4 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? Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price Highest acceptable transfer price Range of acceptable transfer prices Will the managers agree to the trade? < Req 1A to 1C Req 2A to 2D > Show less A 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 2 3 4 Alpha Division: Capacity in units 96,000 416,000 166,000 316,000 Number of units now being sold to outside customers 96,000 416,000 116,000 316,000 Selling price per unit to outside customers $ 62 $ 122 $ 155 Variable costs per unit $ 50 $ 97 $ 120 $ 82 $ 58 Fixed costs per unit (based on capacity) $6 $ 15 $ 20 $9 Beta Division: Number of units needed annually 21,000 46,000 36,000 123,200 Purchase price now being paid to an outside supplier $ 59 $ 121 $ 155* *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 46,000 units to Beta Division for $120 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 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 probably agree to a transfer? d. Assume Beta Division offers to purchase 36,000 units from Alpha Division at $140 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 123,200 units of a different product from the one Alpha Division is producing now. The new product would require $53 per unit in variable costs and would require that Alpha Division cut back production of its present product by 46,200 units annually. What is Alpha Division's lowest acceptable transfer price? Complete this question by entering your answers in the tabs below. Req 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 $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 46,000 units to Beta Division for $120 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole? Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price Highest acceptable transfer price Range of acceptable transfer prices Will the managers agree to the trade? Loss in potential profits for the company < Req 1A to 1C Req 3A to 3D > Show 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 Alpha Division: Capacity in units 96,000 416,000 166,000 316,000 Number of units now being sold to outside customers 96,000 416,000 116,000 316,000 Selling price per unit to outside customers $ 62 Variable costs per unit Beta Division: Number of units needed annually $ 50 Fixed costs per unit (based on capacity) $ 6 $ 122 $ 97 $15 $ 155 $ 82 $ 120 $ 20 $ 58 $ 9 21,000 46,000 36,000 123,200 Purchase price now being paid to an outside supplier $ 59 $ 121 $ 155* *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 46,000 units to Beta Division for $120 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 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 probably agree to a transfer? d. Assume Beta Division offers to purchase 36,000 units from Alpha Division at $140 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 123,200 units of a different product from the one Alpha Division is producing now. The new product would require $53 per unit in variable costs and would require that Alpha Division cut back production of its present product by 46,200 units annually. What is Alpha Division's lowest acceptable transfer price? Complete this question by entering your answers in the tabs below. Req 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 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 probably agree to a transfer? d. Assume Beta Division offers to purchase 36,000 units from Alpha Division at $60 per unit. If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged? Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price Highest acceptable transfer price Range of acceptable transfer prices Will the managers agree to the trade? Division A's ROI should < Req 2A to 2D Req 4 > Show 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 2 3 4 Alpha Division: Capacity in units 96,000 416,000 166,000 316,000 Number of units now being sold to outside customers 96,000 416,000 116,000 316,000 Selling price per unit to outside customers $ 62 $ 122 $ 155 $ 82 Variable costs per unit $ 50 $ 97 $ 120 $ 58 Fixed costs per unit (based on capacity) $ 6 $ 15 $ 20 $ 9 Beta Division: Number of units needed annually 21,000 46,000 36,000 123,200 Purchase price now being paid to an outside supplier $ 59 $ 121 $ 155* *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 46,000 units to Beta Division for $120 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 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 probably agree to a transfer? d. Assume Beta Division offers to purchase 36,000 units from Alpha Division at $140 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 123,200 units of a different product from the one Alpha Division is producing now. The new product would require $53 per unit in variable costs and would require that Alpha Division cut back production of its present product by 46,200 units annually. What is Alpha Division's lowest acceptable transfer price? Complete this question by entering your answers in the tabs below. Req 1A to 1C Req 2A to 2D Req 3A to 3D Req 4 4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 123,200 units of a different product from the one Alpha Division is producing now. The new product would require $53 per unit in variable costs and would require that Alpha Division cut back production of its present product by 46,200 units annually. What is Alpha Division's lowest acceptable transfer price? Lowest acceptable transfer price Req 3A to 3D Req 4 > Show less