Huge Inc. has many divisions that are evaluated on the basis of ROI. One divis

Huge Inc. has many divisions that are evaluated on the basis of ROI. One division Alpha makes boxes. A second division Beta makes candy
and needs 50000 boxes per year. Alpha incurs the following costs for one box:

Direct materials

$0.20

Direct labor

0.70

Variable overhead

0.10

Fixed overhead

0.23

Total

$1.23

Alpha has capacity to make 500000 boxes per year. Beta currently buys its boxes from an outside supplier for $1.40 each (the same price that
Alpha receives).

Refer to Figure 11-5. Assume that Hugo Inc. allows division managers to negotiate transfer price. Alpha is producing and selling 400000
boxes. If Alpha and Beta agree to transfer boxes what is the floor of the bargaining range and which division sets it?
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