Elite inc. has two divisions. one division, beta, makes boxes. a second division, lambda, makes chocolates and needs 90,000 boxes per year. beta incurs the following costs for one box:
col1 direct materials = $0.40
col2 direct labor = $0.70
col3 variable overhead = $0.50
col4 fixed overhead = $0.16
beta has the capacity to produce 720,000 and currently has no excess capacity. lambda currently buys boxes from an external supplier at the market price of $2.00, which is the same price beta receives. if beta and lambda can negotiate transfer prices and agree to internal transfer, then what will be the floor of the bargaining range and which division will set it?
a.$1.35; lambda
b.$2.00; beta
c.$1.80; lambda
d.$1.48; lambda
e.$1.35; beta