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Clinton Corporation has two decentralized divisions, Alpha and Beta. Alpha always has purchased certain units from Beta at $96 per unit. Beta plans to raise
Clinton Corporation has two decentralized divisions, Alpha and Beta. Alpha always has purchased certain units from Beta at $96 per unit. Beta plans to raise the price to $128 per unit, the price it receives from outside customers. As a result, Alpha is considering buying these units from outside suppliers for $96 per unit. Beta's costs follow. Variable costs per unit Annual fixed costs Annual production of these units sold to Alpha $ 90 $140,000 13,000 units Required: a. If Alpha buys from an outside supplier, the facilities that Beta uses to manufacture these units will remain idle. What will be the result if Clinton enforces a transfer price of $128 per unit between Alpha and Beta? b. Suppose Clinton enforces a transfer price of $96 and insists that Beta sell to Alpha before selling to outside customers. Beta currently operates at capacity and can easily sell the units it sells to Alpha on the outside market. What cost will Clinton incur as a result of this policy? Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B If Alpha buys from an outside supplier, the facilities that Beta uses to manufacture these units will remain idle. What will b the result if Clinton enforces a transfer price of $128 per unit between Alpha and Beta? Clinton Corporation's contribution margin would increase x $ 52,000 X Required A Required B >
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