Please help if you can, last assignments of the semester. Completely in over my head.
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 unils 58,000 319,000 103,000 203,000 Number of units now being sold to outside customers 58.000 319,000 34,000 208,000 Selling price per unit to outside wstomers S 103 $ 40 $ 65 S 44 Variable costs per unit 5 6? $ 13 $ 42 $ 23 Fixed costs per unit [based on capacity) 5 23 $ 10 $ 23 $ 5 Beta Division: Number of units needed ennuelly 1D,?00 ?2,000 13,000 53,000 Purchase price now being paid to an oulside supplier S 96 $ 40 $ 65 "' * Before any.r purchase discount. Managers are free to decide ifthey will participate in any inlemal transfers. All transfer prices are negotiated. Required: 1. Refer to case 1 shown above. Alpha Division can avoid $5 per unit in commissions on an):r sales to Beta Division. a. What is the minimum transfer price for Alpha Division? b. What is the maximum transfer price for Beta Division? c. Will the managers agree to a transfer? OYes O No 2. Refer to case 2 shown above. A study indicates that Alpha Division can avin 53 per unit in shipping costs on any sales to Beta Division. a-1. What is the minimum transfer price for Alpha Division? a-2. What is the maximum transfer price for Beta Division? a-3. Would you expect any disagreement between the two divisional managers over what the transfer price should be? ONO OYes b. Assume thatAlpha Division offers to sell 72,000 units to Beta Division for $39 per unit and that Beta Division refuses this price. What will be the loss in potential prots for the companyr as a whole? 3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 4% price discount from the outside supplier. a-1. What is the minimum transfer price for Alpha Division? a-2. What is the range of transfer price the manager's of both divisions should agree? {Round your answers to 2 decimal places.) a-3. Will the managels agree to a transfer? 0 No OYes b. Assume that Beta Division offers to purchase 13,000 units from Alpha Division at $57.40 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 58,000 units of a different product from the one that Alpha Division is now producing. The new product would require $25 per unit in variable costs and would require that Alpha Division cut back production of its present product by 29,000 units annually. What is the lowest acceptable transfer price from Alpha Division's perspective
