Gamma company has two divisions, alpha and beta. Alpha makes and sells products with the following information for the next year:

Selling price	$25
Variable cost per unit	$15
Annual fixed cost	$230 000
Maximum capacity	75 000 units

In this year just ended, Beta purchased 20 000 units of this same product from an outside supplier at $22 per unit. Beta is considering buying 20 000 units of this product from Alpha next year. The outside supplier said they would keep its price at$22 for the next year.

Q1: a) calculate minimum transfer price from the selling division's perspective

b) calculate maximum transfer price from the buying division's perspective

Q2: Based on Q1, a) Alpha can sell only 57 000 units to external customers

b) Alpha can sell only 75 000 units to external customers Q3: Explain whether the internal transfer will take place and the impact on the overall profit of Gamma company based on the calculation.

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