More info The Chair Division currently purchases the cushions for $20 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: Requirements 1. Determine the total contribution margin for Hobson Company for the quarter. 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? 3. 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? 4. Review your answers for Requirements 1,2 , and 3 . What is the best option for Hobson Company? 5. 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 Hobson Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. The Hobson Company is decentralized, and divitions are (Clik the icon to view adbitional inflorination.) considered investment centers. Hobsen has one division that manufactures oak dining rom chairs with upholstered seat cushions. The Chair Division cuts. Bssembles, and fnishes the cak chairs and then purchases and atlaches the seat custions. Requirement 1. Determine the total contritution margin for Hobson Company for the quarter. Requirement 2. Assume the Chair Division purchases the 800 cushions needed from the Cushicn Division at its current saies price. What is the total contribution margin for each division and the cumpany? Requirement 3. Assume the Chait Dision purchases the Boo cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for agch division and the company? (Enter "Vr for any zere amounts ) Requirement 4. Review yout answers for Requitements 1, 2 and 3 . What is the best option for Habson Company? By having the Chair Division purchase the cushions from an outside vendor, the compary would generate in total contribution margin than if the division purchases cushions internally. Requirement 5. 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 Dilsion with 800 cushions per quarter. What transfer price should Hotson Company set? Explain your reasoning. Using the trantfer price you determined. calculate the total consribution margin for the quarter
