Problem 11-25 (Algo) Basic Transfer Pricing [LO11-3) 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 54,000 293,000 110,090 203,888 Number of units now being sold to outside customers 54,088 293,000 84,800 203,800 Selling price per unit to outside customers $ 97 $ 44 $ 68 $ 44 Variable costs per unit $ 62 $ 25 $ 44 $ 29 Fixed costs per unit (based on capacity $ 24 $ 12 $ 26 $ 5 Beta Division: Number of units 9,400 needed annually 69,00 23,000 66,000 Purchase price now being paid to an outside supplier $ 89 $ 42 $ 68* "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 Bets 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 transfer? 2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid 56 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 of 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 60.000 units to Beta Division for $41 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 on 4 price discount from the outside supplier What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's highest acceptable transfer price? What is the range of acceptable transfer prices any between the two divisions with managers probably agree to a transfert d. Assume Bote Division offers to purchase 23.000 units from Alpha Division 56028 por Alpha Division accepts this price, would you expect its ROI to increase, decrease or remain unchanged? 4. Refer to case shown above. Assume that Beta Division wants Alpha Devon to provide two 66.000 units of different product from the one Alpha Division is producing now. The new product would require $26 porn in variable costs and would require that Alpha Division cut back production of present product by 33.000 units annual What is Alpha Division's lowest acceptable transfer price? Complete the Complete this question by entering your answers in the tabs below. Reg 1A to Reg 2A to Req 3A to 1C 2D 3D Reg 4 1. Refer to case 1 shown above. Alpha Division can avoid 54 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 of any) between the two divisions? Will the managers probably agree to 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 anys There is not a range of comptable transfer prices There is a range of acceptatie transfer prices as shown below Transfer price Win the managers agree to the trade YE No Res 2Al2D> 2 of Next RAP Complete this question by entering your answers in the tabs below. Req 1A to Reg 2A toi Reg 3A to 10 2D 3D Reg 4 2. Refer to case 2 shown above. A study indicates that Alpha Division can avold $6 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 69,000 units to Beta Division for $41 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole? Show less Identify the lowest and highest actable transfer prices Lowest acceptable transfer price Highest scomptable transfer price Identify the range of acceptable transfer prices and There is not a range of acceptable transfer prices There is a range of acceptable transfer prices as shown below Transfer price w the managers agree to the vade? Yes ONO Loss in potential profit for the company Next > 2 S MacBook Pro Complete this question by entering your answers in the tabs below. Req 1A to Req 2A to Reg 3d to 1c 2D Req 4 3D 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 $60.28 per unit. If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged? (Round your final answers to 2 decimal places.) Show less Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price Highest sceptable transfer price Identify the range of acceptable transfer prices dany There is not a range of soceptable transfer prices There is a range of seceptable transfer prices as shown below Transfer s Will the managers agree to the trade? Yes NO OMSON A'S ROI should increa Decre 50 Next > 7 MacBook Pro Complete this question by entering your answers in the tabs below. Reg 1A to Reg 2A to Reg 3A to 1C 20 30 Reg 4 Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 66,000 units of a different product from the one Alpha Division is producing now. The new product would require $26 per unit in variable costs and would require that Alpha Division cut back production of its present product by 33,000 units annually. What is Alpha Division's lowest acceptable transfer price? Show less Laccetta price