The Cutter Company is decentralized, and divisions are considered investment centers. Cutler has one division that manufactures oak dining room chairs with upholstered seat cushions. The Chair Division cuts, assembles, and finishes the oak chairs and then purchases and attaches the seat cushions (Click the icon to view additional information) Read the requirements Requirement 1. Determine the total contribution margin for Cutler Company for the quarter. Number of units Contribution margin per unit Total contribution margin Chair Division Cushion Division Total Requirement 2. Assume the Chair Division purchases the 900 cushions needed from the Cushion Division at its current sales price. What is the total contribution margin for each division and the company? Number of units Contribution margin per un Total contribution margin Chair Division Cushion Division Total Requirement 3. Assume the Chair Division purchases the 900 cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company? (Enter "Ofor any zero amounts.) Number of units Contribution margin per unit Total contribution margin Chair Division Cushion Division Total Requirement 4. Review your answers for Requirements 1, 2 and 3. What is the best option for Cutler Company? The best option for Cutler is By having the Chair Division purchase the cushions from an outside vendor, the company would generate in total contribution margin than if the division purchases cushions internally Requirements. Assume the Cushion Division has capacity of 1,800 cushions per quarter and can continue to supply its outside customers with 900 cushions per quarter and also supply the Chair Division with 900 cushions per quarter. What transfer price should Cutler Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter Cutler Company should set the transfer price at because the Chair Division would not be willing to pay more than Total contribution margin Using the transfer price you determined, calculate the fotal contribution margin for the quarter, Number of units Contribution margin per unit Chair Division Cushion Division-external Cushion Division-internal Total 1 Requirements 1. Determine the total contribution margin for Cutler Company for the quarter, 2. Assume the Chair Division purchases the 900 cushions needed from the Cushion Division at its current sales price. What is the total contribution margin for each division and the company? 3. Assume the Chair Division purchases the 900 cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company? 4. Review your answers for Requirements 1, 2, and 3. What is the best option for Cutler Company? 5. Assume the Cushion Division has capacity of 1,800 cushions per quarter and can continue to supply its outside customers with 900 cushions per quarter and also supply the Chair Division with 900 cushions per quarter. What transfer price should Cutler Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter Print Done More info The Chair Division currently purchases the cushions for $15 from an outside vendor. The Cushion Division manufactures upholstered seat cushions that are sold to customers outside the company. The Chair Division currently sells 900 chairs per quarter, and the Cushion Division is operating at capacity, which is 900 cushions per quarter. The two divisions report the following information: Chair Division Cushion Division Sales Price per Chair $ 70 Sales Price per Cushion $ 26 Variable Cost (other than cushion) 40 Variable Cost per Cushion Variable Cost cushion) S Contribution Margin per Chair $ 15 Contribution Margin per Cushion ani 11 15 90 og. 15 Print Done More info The Chair Division currently purchases the cushions for $15 from an outside vendor. The Cushion Division manufactures upholstered seat cushions that are sold to customers outside the company. The Chair Division currently sells 900 chairs per quarter, and the Cushion Division is operating at capacity, which is 900 cushions per quarter. The two divisions report the following information: Chair Division Cushion Division Sales Price per Chair $ 70 Sales Price per Cushion $ 26 Variable Cost (other than cushion) 40 Variable Cost per Cushion Variable Cost (cushion) $ 15 Contribution Margin per Chair Contribution Margin per Cushion 11 15 15 Requirements 1. Determine the total contribution margin for Cutler Company for the quarter. 2. Assume the Chair Division purchases the 900 cushions needed from the Cushion Division at its current sales price. What is the total contribution margin for each division and the company? 3. Assume the Chair Division purchases the 900 cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company? 4. Review your answers for Requirements 1, 2 and 3. What is the best option for Cutler Company? 5. Assume the Cushion Division has capacity of 1,800 cushions per quarter and can continue to supply its outside customers with 900 cushions per quarter and also supply the Chair Division with 900 cushions per quarter. What transfer price should Cutler Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter Print Done The Cutier Company is decentralized, and divisions are considered investment centers, Cutler has one division that manufactures oak dining room chairs with upholstered seat cushions. The Chair Division cuts, assembles, and finishes the oak chairs and then purchases and attaches the seat cushions
