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Problem 11A-6 Basic Transfer Pricing [LO11-5] Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division's return on investment (ROI). Assume the following information relative to the two divisions Case Alpha Division: Capacity in units Number of units now being sold to 53,000 286,000 103,000 195,000 outside customers Selling price per unit to outside 53,000 286,000 76,000 195,000 customers Variable costs per unit Fixed costs per unit (based on $99 S45 $ $63 S 23 $ 68 47 43 $ capacity) $24 15 $ 25 $ Beta Division: Number of units needed annually Purchase price now being paid to 10,10075,000 21,000 64,000 an outside supplier $91 42 $ 68 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 $4 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 K Prev4 of 5 Next>