Req 1A to 1C Req 2A to 2D Req 3A to 3D Req 4 2. Refer to case 2 shown above. A s

Question

Req 1A to 1C Req 2A to 2D Req 3A to 3D Req 4 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 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? 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 75,000 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 ldentify the lowest and highest acceptable transfer prices Lowest acceptable transfer price Highest acceptable transfer price ldentify 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 Will th Yes ONo e managers agree to the trade? Loss in potential profits for the company

Explanation / Answer

A) 1) Contribution per unit = Selling price per unit - variable cost per unit = $96 - $58 $38 Variable costs per unit = $58 - $4 $54 Transfer price Variable Cost per unit + Total contribution margin on lost sales / Number of units transferred Transfer price $54 + ($38 x 51000 units) / 51000 units $92 Beta Division Transfer price Cost of buying from outside supplier = $89 a) Lowest Acceptable Transfer price from Alpha Prespective $92 Cost per unit b) Highest Acceptable Transfer price from Beta Prespective $89 Cost per unit c)There is not a range of acceptable transfer price. d) No e) Loss in potential profits for the company = $92 - $89 $3 Cost per unit

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.