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.

Read the requirements.

Requirement $1.$ Determine the total contribution margin for Dutton Company for the quarter.

Requirement $2.$ Assume the Chair Division purchases the $800$ cushions needed from the Cushion Division at its current sales price. What is the total contribution margin for each division and the company?

zero amounts.$)$

Requirement $4.$ Review your answers for Requirements $1,2,$ and $3.$ What is the best option for Dutton Company?

The best option for Dutton 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.

More info

The Chair Division currently purchases the cushions for $$18$ from an outside vendor. The Cushion

Division manufactures upholstered seat cushions that are sold to customers outside the company.

The Chair Division currently sells $800$ chairs per quarter, and the Cushion Division is operating

at capacity, which is $800$ cushions per quarter. The two divisions report the following information:

Determine the fotal contribution margin for Dutton Company for the quarter.

Assume the Chair Division purchases the $800$ cushions needed from the

Cushion Division at its current sales price. What is the total contribution

margin for each division and the company?

Assume the Chair Division purchases the $800$ cushions needed from the

Cushion Division at its current variable cost. What is the total contribution

margin for each division and the company?

Review your answers for Requirements $1,2,$ and $3.$ What is the best option

for Dutton Company?

Assume the Cushion Division has capacity of $1,600$ cushions per quarter and

can continue to supply its outside customers with $800$ cushions per quarter

and also supply the Chair Division with $800$ cushions per quarter. What

transfer price should Dutton Company set? Explain your reasoning. Using the

transfer price you determined, calculate the total contribution margin for the

quarter.

What transfer price should Dutton Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter.

Dutton Company should set the transfer price at

because the Chair Division would not be willing to pay more than

Using the transfer price you determined, calculate the total contribution margin for the quarter.