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Best Practices, Inc., is a management consulting firm. Its Corporate Division advises private firms on the adoption and use oClinton Corporation has two decentralized divisions, Alpha and Beta. Alpha always has purchased certain units from Beta at $9Required A Required B If Alpha buys from an outside supplier, the facilities that Beta uses to manufacture these units will rRequired A Required B ----- Suppose Clinton enforces a transfer price of $92 and insists that Beta sell to Alpha before selli

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Answer #1

a.Since there is no spare capacity, the minimum transfer price is equal to market rate

i.e. $655 per hour

b.Maximum price is equal to the price it pays i.e. $255 per hour

Contribution margin would increase by (92-87)*11000

= $55,000

Cost = (130-92)*11,000 = $418,000

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