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Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own divisions 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		292,000		103,000			201,000
Number of units now being sold to outside customers		54,000		292,000		79,000			201,000
Selling price per unit to outside customers	$	96	$	42	$	67		$	48
Variable costs per unit	$	61	$	19	$	42		$	34
Fixed costs per unit (based on capacity)	$	20	$	8	$	23		$	10
Beta Division:
Number of units needed annually		10,200		69,000		18,000			64,000
Purchase price now being paid to an outside supplier	$	87	$	39	$	67	*

*Before any purchase discount.

Managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated.

1. Refer to case 1 shown above. Alpha Division can avoid $5 per unit in commissions on any sales to Beta Division.

	Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price ? Highest acceptable transfer price ? ? Transfer price ? Will the managers agree to the trade? Yesradio button unchecked1 of 2 Noradio button unchecked2 of 2

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.

	Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price ? Highest acceptable transfer price ? ? Transfer price ? Loss in potential profits for the company ?

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