Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their return on impetment (ROII. Assume the

image text in transcribed
image text in transcribed
Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their return on impetment (ROII. Assume the following information for the two divisions: '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 \$S per unit in shipping costs on any sales to Beta Division. a. What is Alpha Division's lowest acceptable transfer price? the two divisional managers over what the exact transfer price should be? d. Assume Alpha Division offers to sell 47,000 units to Beta Division for $122 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 occeptable 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 37,000 units from Alpha Division at $145 per unit. If Alpha Division accepts this price. would you expect its ROI to increase, decrease, or temain unchanged? 4. Refer to case 4 shown above. Assume Beta Division wants Alpha Division to provide it with 123,400 units of a different product from the one Alpha Division is producing now. The new product would require $55 per unit in variable costs and would require Alpha Division to cut back production of its present product by 46,275 units annually. What is Alpha Division's lowest acceptable transfer price? Complete this question by entering your answers in the tabs below. 4. Refer to case 4 shown above. Assume Beta Division wants Apha Division to provide it with 123,400 units of a different product from the one Alpha Division is producing now. The new product would require $55 per unit in variable costs and would require Alpha Division to cut back production of its present product by 46,275 units annually. What is Alpha Division's lowest acceptable transfer price

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing and Assurance Services Understanding the Integrated Audit

Authors: Karen L. Hooks

1st edition

471726346, 978-0471726340

More Books

Students also viewed these Accounting questions

Question

LO 39-1 How prevalent are psychological disorders?

Answered: 1 week ago

Question

What were some of the team norms at Casper?

Answered: 1 week ago

Question

What were some of the team roles at Casper?

Answered: 1 week ago