Financial data for Joel de Paris, Inc., for last year follow:

Joel de Paris, Inc. Balance Sheet
	Beginning Balance			Ending Balance
Assets
Cash	$	132,000		$	136,000
Accounts receivable		345,000			484,000
Inventory		565,000			486,000
Plant and equipment, net		848,000			824,000
Investment in Buisson, S.A.		406,000			426,000
Land (undeveloped)		247,000			248,000
Total assets	$	2,543,000		$	2,604,000
Liabilities and Stockholders' Equity
Accounts payable	$	390,000		$	344,000
Long-term debt		1,029,000			1,029,000
Stockholders' equity		1,124,000			1,231,000
Total liabilities and stockholders' equity	$	2,543,000		$	2,604,000

Joel de Paris, Inc. Income Statement
Sales					$	4,775,000
Operating expenses						4,106,500
Net operating income						668,500
Interest and taxes:
Interest expense	$	130,000
Tax expense		196,000				326,000
Net income					$	342,500

The company paid dividends of $235,500 last year. The Investment in Buisson, S.A., on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%.

Required:

1. Compute the company's average operating assets for last year.

2. Compute the companys margin, turnover, and return on investment (ROI) for last year. (Round "Margin", "Turnover" and "ROI" to 2 decimal places.)

3. What was the companys residual income last year?

Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own divisions return on investment (ROI). Assume the following information relative to the two divisions:

	Case
	1		2		3			4
Alpha Division:
Capacity in units		52,000		310,000		107,000			190,000
Number of units now being sold to outside customers		52,000		310,000		83,000			190,000
Selling price per unit to outside customers	$	100	$	40	$	61		$	45
Variable costs per unit	$	63	$	19	$	35		$	32
Fixed costs per unit (based on capacity)	$	25	$	9	$	19		$	7
Beta Division:
Number of units needed annually		9,700		69,000		19,000			56,000
Purchase price now being paid to an outside supplier	$	90	$	37	$	61	*

*Before any purchase discount.

Managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated.

Required:

1. Refer to case 1 shown above. Alpha Division can avoid $6 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 probably agree to a transfer?

2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $6 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?

c. What is the range of acceptable transfer prices (if any) between the two divisions? Would you expect any disagreement between the two divisional managers over what the exact transfer price should be?

d. Assume Alpha Division offers to sell 69,000 units to Beta Division for $36 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole?

3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 6% 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 19,000 units from Alpha Division at $52.34 per unit. If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged?

4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 56,000 units of a different product from the one Alpha Division is producing now. The new product would require $27 per unit in variable costs and would require that Alpha Division cut back production of its present product by 28,000 units annually. What is the lowest acceptable transfer price from Alpha Divisions perspective?