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0 Question 4 Gamma Company has two divisions, Alpha and Beta. Division Alpha makes and sells a product with the following price and costs for 2009. These are expected to remain constant for year 2010. Selling price per unit 25 EA EA Variable cost per unit 15 Annual fixed cost $230,250 The maximum capacity of division Alpha is 75,000 units. In 2009, division Beta purchased 20,000 units of this same product from an outside supplier at $22 per unit. Division Beta is considering buying 20,000 units of this product for 2010 from division Alpha. The outside supplier said it will keep its price at $22 for next year. Required 3 a. According to the general transfer-pricing formula, indicate what price division Alpha should charge to division Beta under each of the following conditions: i) Division Alpha can sell only 57,000 units to external customers in 2010. ii) Division Alpha can sell 75,000 units to external customers in 2010. 2 b. If division Alpha insists on the price determined in part (a)ii), explain whether a transfer will take place. 2 c. Identify and briefly explain two factors that a company should take into consideration when making a decision about establishing a division in a foreign country. 3 d. Briefly describe each of the three general methods to establish transfer prices