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 (ROD. Assume the following information relative to the two divisions Alpha Division: Capacity in units Number of units now being sold to 57,09 310,030 100,000 197,ee0 57,00 318, 60 75,680197,030 outside customers Selling price per unit to outside custoners Variable costs per unit Fixed costs per unit (based on $44 s 231 s 102 62 $ 46 65 22 S25es 10.200 72,000 capacity) Beta Division Number of units needed annually Purchase price now being paid to 21,000 60,909 an outside supplier 95 $ 44% 62. "Before any purchase discount Manages are free to decide it they will participate in any internal transfers All ranster prices are negotiated Required: 1 Refer to case 1 shown above. Alpha Division can avoid $4 per unit in commissions on any sales to Beta Division a What is the lowest acceptable transfer price from the perspective of the Alpha Division? b What is the highest acceptable transfer price from the perspective of the Beta Division? d. What is the range of acceptable transfer prices (If any) between the two divisions? wel the managers probably agree to a transfer? 2 Refer to case 2 shown above. A study indicates that Alpha Dvision can avoid $4 per unit in shipping costs on any sales to Beta Division a What is the lowest acceptable transfer price from the perspective of the Alpha Division? b What is the highest acceptable transfer price from the perspective of the Beta Division? what the range of acceptable transfer prices f any between the two divisions two divisional managers over what the exact transfer price should be? d. Assume Alpha Division offers to sell 72,000 units to Beta Division for $43 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole? Would you expect any disagreement between the 3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 4% price discount from the outside supplier a What is the lowest acceptable transfer price from the perspective of the Alpha Division? b. What is the highest acceptable transfer price from the perspective of the Beta Division c. What is the range of acceptable transfer prices f any) between the two divisions? Will the managers probably agree to a trardster? d. Assume Beta Division offers to purchase 21,000 units from Alpha Division at $54 52 per unit. If Alpha Division accepts this price would you expect its ROl to increase, decrease, or remain unchanged? 4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide R with 60,000 units of a different product from the one Alpha Division is producing now The new product would require $26 per unit in vanable costs and would require that Alpha Division cut back production of its present product by 30,000 units annually What is the lowest acceptable transfer price from would you expect its ROI to increase, decrease, or remain unchanged? n m pl vson dccepts this price, 4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 60,000 units of a different product from the one Alpha Division is producing now. The new product would require $26 per unit in variable costs and would require that Alpha Division cut back production of its present product by 30,000 units annually. What is the lowest acceptable transfer price from Alpha Division's perspective? 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 $4 per unit in commissions on any sales to Beta Division. a. What is the lowest acceptable transfer price from the perspective of the Alpha Division? b. What is the highest acceptable transfer price from the perspective of the Beta Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers transfer? probably agree to a Show lesS Identify the lowest and highest acceptable transfer prices Lowest acceptable transfer price Highest acceptable transfer price dentify the range of acceptable transfer prices (if any): OThere is not a range of acceptable transfer prices O There is a range of acceptable transfer prices as shown below s Transfer price s Will the managers agree to the trade? Yes No > Req 2A to 2D Req 1A to 1C Next Req 1A to 1C Req 3A to 3D Req 4 3 . Refer to case 3 shown above. Assume that Beta Division is now receiving an 4% price discount from the outside supplier, a. What is the lowest acceptable transfer price from the perspective of the Alpha Division? b. What is the highest acceptable transfer price from the perspective of the Beta Division? 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 21,000 units from Alpha Division at $54.52 per unit. If Alpha Division accepts this price. would you expect its ROI to increase, decrease, or remain unchnged? (Round your final answers to 2 decimal places.) Show less 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) There is not a range of acceptable transfer prices. OThere is a range of acceptable transfer prices as shown below Transfer price Will the managers agree to the trade? OYes No Division A's ROI should Increase Decrease Req 4 ) Req 2A to 2D Next > 4 of 5 ePreX. Complete this question by entering your answers in the tabs below Rea 1A to 1C Reg 2A to 2D Reg 3A to 30Reg 4 Refer to case 4 shown above. Assume that Beta Division wants Alpha Division tolprovide it with 60,000 units of a diferent product from the one Alpha Division is producing now. The new product would require $26 per un require that Alpha Divisi transfer price from Alpha Division's perspective? t in variable costs and would on cut back production of its present product by 30,000 units annually. What is the lowest acceptable Show lesS acceptable transfer price Req 3A to 3D KPrex 4 of5 ll Next