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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
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 1,500 chairs per quarter, and the Cushion Division is operating at capacity, which is 1,500 cushions per quarter. The two divisions report the following information: The Greco Company is decentralized, and divisions are considered investment centers. Greco 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. Requirement 1. Determine the total contribution margin for Greco Company for the quarter. 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 Greco Company should set the transfer price at because the Chair Division would not be willing to pay more than
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