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Business, 05.05.2020 11:49 pamelakroll98

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 50,000 292,000 104,000 192,000 Number of units now being sold to outside customers 50,000 292,000 79,000 192,000 Selling price per unit to outside customers $ 103 $ 41 $ 66 $ 45 Variable costs per unit $ 67 $ 20 $ 42 $ 32 Fixed costs per unit (based on capacity) $ 28 $ 8 $ 23 $ 7 Beta Division: Number of units needed annually 10,700 73,000 21,000 64,000 Purchase price now being paid to an outside supplier $ 96 $ 39 $ 66 * — *Before any purchase discount. Managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated.

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