Alpha International Corporation has two divisions, beta and gamma. Beta produces an electronic component that sells for $75 per unit, with the following costs based on its capacity of 217,600 units:
Direct materials
|
$23.00
|
Direct labour
|
18.00
|
Variable overhead
|
4.00
|
Fixed overhead
|
11.00 |
Beta is operating at 79% of normal capacity and gama is purchasing 17,000 units of the same component from an outside supplier for $69 per unit.
1 .Calculate the benefit, if any, to beta in selling to gama 17,000 at the outside supplier's price.
2. Calculate the lowest price beta would be willing to accept.
3. If beta is operating at full capacity what would be the lowest transfer that beta division is willing to accept?