Alpha Division: Capacity in units. Number of units now being sold to outside customers Selling price per unit to outside
Posted: Wed May 04, 2022 4:29 pm
- Alpha Division Capacity In Units Number Of Units Now Being Sold To Outside Customers Selling Price Per Unit To Outside 1 (171.46 KiB) Viewed 50 times
1. Refer to case 1 shown above. Alpha Division can avoid $2 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 $5 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 317,000
units to Beta Division for $122 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 8% 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 37,000
units from Alpha Division at $145 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 123,400 units of a different
product from the one Alpha Division is producing now. The new
product would require $55 per unit in variable costs and would
require that Alpha Division cut back production of its present
product by 46,275 units annually. What is Alpha Division’s lowest
acceptable transfer price?
Alpha Division: Capacity in units. Number of units now being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Beta Division: Number of units needed annually Purchase price now being paid to an outside supplier 1 97,000 97,000 $ 64 $ 52 $ 6 22,000 $ 61 2 417,000 417,000 $ 124 $ 99 $ 15 47,000 $ 123 Case 3 167,000 117,000 $ 160 $ 125 $ 20 37,000 $ 160* 4 317,000 317,000 $ 84 $ 60 $9 123,400