Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Clinton Corporation has two decentralized divisions, Alpha and Beta. Alpha always has purchased certain units from Beta at $90 per unit. Beta plans to raise

Clinton Corporation has two decentralized divisions, Alpha and Beta. Alpha always has purchased certain units from Beta at $90 per unit. Beta plans to raise the price to $123 per unit, the price it receives from outside customers. As a result, Alpha is considering buying these units from outside suppliers for $90 per unit. Beta's costs follow. Variable costs per unit Annual fixed costs Annual production of these units sold to Alpha $ 84 $170,000 12,000 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 $123 per unit between Alpha and Beta? b. Suppose Clinton enforces a transfer price of $90 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? 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 be the result if Clinton enforces a transfer price of $123 per unit between Alpha and Beta? Clinton Corporation's contribution margin would < Required A Required B > Complete this question by entering your answers in the tabs below. Required A Required B Suppose Clinton enforces a transfer price of $90 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? Cost < Required A Required B >

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

Scoreboard Your Practice 7 Numbers To Understand Your Design Firms Financials

Authors: Rick J Linley

1st Edition

1039138985, 978-1039138988

More Books

Students also viewed these Accounting questions