Refer to case 3 shown above. Assume that Beta Division is now receiving an 3% price discount
Question:
Refer to case 3 shown above. Assume that Beta Division is now receiving an 3% 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 21,000 units from Alpha Division at $55.14 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 60,000 units of a different product from the one Alpha Division is producing now. The new product would require $24 per unit in variable costs and would require that Alpha Division cut back production of its present product by 30,000 units annually. What is Alpha Division's lowest acceptable transfer price?