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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 4 102 $ 665 47 33 $ 9 $ 935 Alpha Division: Capacity in units 53,000 301,00 106.900 203,000 Number of units now being sold to outside customers 53,000 301,00 Selling price per unit to outside 79,800 203.000 customers Variable costs per unit 41 $ 655 $ 185 38 $ Fixed costs per unit (based on capacity) 265 10$ 22 $ Beta Division: Number of units needed annually 9, 100 73,000 23,000 56,000 Purchase price now being paid to an outside supplier 40 $ 65" *Before any purchase discount. 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 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 $4 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 clisagreement between the two divisional managers over what the exact transfer price should be? d. Assume Alpha Division offers to sell 73,000 units to Beta Division for $39 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company 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. 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 23,000 units from Alpha Division at $5740 per unit. If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged? 3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 4% 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 23,000 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 56,000 units of a different product from the one Alpha Division is producing now. The new product would require $29 per unit in variable costs and would require that Alpha Division cut back production of its present product by 28,000 units annually. What is Alpha Division's lowest acceptable transfer price? Complete this question by entering your answers in the tabs below. Reg 1A to IC Req 2A to 2D Reg 3A to 3D Reg 4 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 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 less Identify the lowest and highest acceptable transfer prices Lowest acceptable transfer price Highest acceptable transfer price Identify the range of acceptable transfer prices (if any) There is not a range of acceptable transfer prices. There is a range of acceptable transfer prices as shown below Transfer price s Will the managers agree to the trade? Yes No Reg 1A 10 TC Req 2A to 2D >