please ignore the answers I have already put in.
More info The Chair Division currently purchases the cushions for $25 from an outside vendor. The Cushion Division manufactures upholstered seat cushions that are sold to customers outside the company. The Chair Division currently sells 1,400 chairs per quarter, and the Cushion Division is operating at capacity, which is 1,400 cushions per quarter. The two divisions report the following information: Chair Division Cushion Division Sales Price per Chair 90 Sales Price per Cushion $ 32 Variable Cost (other than cushion) 45 Variable Cost per Cushion Variable Cost (cushion) 25 $ Contribution Margin per Chair 20 $ 19 Contribution Margin per Cushion 13 Print Done Requirements 1. Determine the total contribution margin for Rossi Company for the quarter. 2. Assume the Chair Division purchases the 1,400 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 1,400 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 Rossi Company? 5. Assume the Cushion Division has capacity of 2,800 cushions per quarter and can continue to supply its outside customers with 1,400 cushions per quarter and also supply the Chair Division with 1,400 cushions per quarter. What transfer price should Rossi Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Print Done (Click the icon to view additional information.) The Rossi Company is decentralized, and divisions are considered investment centers. Rossi 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. Read the requirements Requirement 1. Determine the total contribution margin for Rossi Company for the quarter. Number of units Contribution margin per unit Total contribution margin Chair Division 1400 20 28000 Cushion Division 1400 19 26600 54600 Total = Requirement 2. Assume the Chair Division purchases the 1,400 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 unit Total contribution margin Chair Division 1400 13 18200 Cushion Division 1400 19 26600 44800 Total Requirement 3. Assume the Chair Division purchases the 1,400 cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company? (Enter "O" for any zero amounts.) Number of units Contribution margin per unit = Total contribution margin Chair Division 1400 20 28000 Cushion Division 1400 12 16800 Total 44800 x = Requirement 4. Review your answers for Requirements 1, 2 and 3. What is the best option for Rossi Company? The best option for Rossi is the current scenario (Requirement 1). By having the Chair Division purchase the cushions from an outside vendor, the company would generate more in total contribution margin than if the division purchases cushions internally. Requirement 4. Review your answers for Requirements 1, 2, and 3. What is the best option for Rossi Company? The best option for Rossi is the current scenario (Requirement 1). By having the Chair Division purchase the cushions from an outside vendor, the company would generate more in total contribution margin than if the division purchases cushions internally. Requirement 5. Assume the Cushion Division has capacity of 2,800 cushions per quarter and can continue to supply its outside customers with 1,400 cushions per quarter and also supply the Chair Division with 1,400 cushions per quarter. What transfer price should Rossi Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Rossi 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. Number of units Contribution margin per unit = Total contribution margin Chair Division = Cushion Division-external x = Cushion Divisioninternal Total
