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:

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 53,000 305,000 110,000 209,000 Number of units now being sold to outside customers 53,000 305,000 83,000 209,000 Selling price per unit to outside customers 5 96 $ 38 $ 61 $ 44 Variable costs per unit $ 58 $ 18 $ 34 $ 28 Fixed costs per unit (based on capacity) 5 20 $ 5 $ 19 $ 5 Beta Division: Number of units needed annually 9,100 65,000 20,000 64,000 Purchase price now being paid to an outside supplier $ 87 $ 36 $ 61* l *Before any purchase discount. Required: 1. Refer to case 1 shown above. Alpha Division can avoid $5 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 65,000 units to Beta Division for $35 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 5% 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 20,000 units from Alpha Division at $52.95 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 64,000 units of a different product from the one Alpha Division is producing now. The new product would require $24 per unit in variable costs and would require that Alpha Division cut back production of its present product by 32,000 units annually. What is Alpha Division's lowest acceptable transfer price? Req 1A to 1C Req 2A to 2D Req 3A to 3D 1. Refer to case 1 shown above. Alpha Division can avoid $5 per unit in commissions on any 5 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 transfer? Identify the lowest and highest acceptable transfer prices: -- -- Identify the range of acceptable transfer prices (if any): OThere is not a range of acceptable transfer prices. OThere is a range of acceptable transfer prices as shown below: Will the managers agree to the trade? Req 1A to 1C Req 2A to 2D Req 3A to 3D Reg 4 2. Refer to case 2 shown above. A study indicates that Alpha Division can av 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 d between the two divisional managers over what the exact transfer price sho d. Assume Alpha Division offers to sell 65,000 units to Beta Division for $35 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 Identify the range of acceptable transfer prices (if any): OThere is not a range of acceptable transfer prices. OThere is a range of acceptable transfer prices as shown below: S Transfer price S Will the managers agree to the trade? OYes ONO Loss in potential profits for the companyReq 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 5% pr 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? transfer? d. Assume Beta Division offers to purchase 20,000 units from Alpha Division at $52.9 price, would you expect its ROI to increase, decrease, or remain unchanged? (Round your final answers to 2 decimal places.) Identify the lowest and highest acceptable transfer prices: Highest acceptable transfer price -_ Identify the range of acceptable transfer prices (if any): OThere is not a range of acceptable transfer prices. OThere is a range of acceptable transfer prices as shown below: Will the managers agree to the trade? Division A's ROI should O Decrease Req 1A to 1c Req 2A to 20 Req 3A to 3D Refer to case 4 shown above. Assume that Beta Division wants Alpi product from the one Alpha Division is producing now. The new pro would require that Alpha Division cut back production of its present lowest acceptable transfer price