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 $ 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 BetaReq 1A to IC|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? Show less A Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price $ 62 Highest acceptable transfer price 59 Range of acceptable transfer prices None of the choices are correct Will the managers agree to the trade? No Req 1A to 1C Req 24 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? Show less A Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price $ 117 Highest acceptable transfer price $ 121 Range of acceptable transfer prices $ 117 s Transfer price s $ 121 Will the managers agree to the trade? Yes Loss in potential profits for the company $ 184,000Req 1A to 1C Req 2A to 2D Req 3Ato 3D Reg 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? Show less Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price $ 155 Highest acceptable transfer price $ 155 Range of acceptable transfer prices None of the choices are correct Will the managers agree to the trade? No Division A's ROI should Increase Prev 1 of 1 NextReq 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? Show less A Lowest acceptable transfer price $ 82