Homework- Chapter 11 0 Saved 9 References 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 1 2 3 4 Alpha Division: Capacity in units 91,999 411,999 161,999 311,999 Number of units now being sold to outside customers 91,999 411,999 111,999 311,999 Selling price per unit to outside customers $ 52 $ 112 $ 139 $ 72 Variable costs per unit $ 49 $ 87 $ 95 $ 48 Fixed costs per unit (based on capacity) $ 6 $ 15 $ 29 $ 9 Beta Division: Number of units needed annually 16,999 41,999 31,999 122,299 Purchase price now being paid to an outside supplier $ 49 $ 111 $ 139* 'Before any purchase discount. Required: 1. Refer to case 1 shown above. Alpha Division can avoid $2 per unit in commissions on any sales to Beta Division. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? 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 $5 per unit in shipping costs on any sales to Beta Division. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? 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 311,000 units to Beta Division for $110 per unit and that Beta Division refuses this price. What will be the loss in potential prots for the company as a whole? 3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 8% price discount from the outside supplier. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? 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 31,000 units from Alpha Division at $115 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 122,200 units of a different product from the one Alpha Division is producing now. The new product would require $43 per unit in variable costs and would require that Alpha Division cut back production of its present product by 45,825 units annually. What is Alpha Division's lowest acceptable transfer price? \"D References Complete this question by entering your answers in the tabs below. Req 2A to ZD Req 3A to 3D Req 4 1. Refer to case 1 shown above. Alpha Division can avoid $2 per unit in commissions on any sales to Beta Division. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer? Show IessA Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price Highest acceptable transfer price Range of acceptable transfer prices Will the managers agree to the trade? Req 2A to 2D > Req 1A to IE Reg 2A to 2D Req 3A to 3D Req 4 2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $5 per unit in shipping costs on any sales to Beta Division. a.What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? 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 311,000 units to Beta Division for $110 per unit and that Beta Division refuses this price. What will be the loss in potential prots for the company as a whole? Show IessA Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price Highest acceptable transfer price Range of acceptable transfer prices Loss in potential prots for the company _ Req 1A to 1c Req 3A to 3D )