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 Alpha Division: 57,000 281,000 101,000 200,000 Number of units now being sold to outside customers 57,000 281,000 76,000 200,000 Selling price per unit to outside 66 $ customers Variable costs per unit Fixed costs per unit (based on 48 32 $60 $ 22 $ capacity) $20 14 22 Beta Division: Number of units needed annually10,700 67,000 20,000 64,000 Purchase price now being paid to an outside supplier s 90 43 66. 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 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.