Question Help O (Click the icon to view additional information.) The Cutler 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. Read the requirements. Requirement 1. Determine the total contribution margin for Cutler Company for the quarter. Number of units X Contribution margin per unit = 45 Total contribution margin 81000 Chair Division 1800 Cushion Division 1800 18 32400 Total 113400 Requirement 2. Assume the Chair Division purchases the 1,800 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 1800 X Contribution margin per unit = 18 Total contribution margin 32400 Chair Division Cushion Division 1800 32400 18 Total 64800 Requirement 3. Assume the Chair Division purchases the 1,800 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 X Contribution margin per unit = Total contribution margin Chair Division 1800 X 36 64800 1800 Cushion Division 0 0 Total 64800 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 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. Choose from any list or enter any number in the input fields and then continue to the next question. 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 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 3,600 cushions per quarter and can continue to supply its outside customers with 1,800 cushions per quarter and also supply the Chair Division with 1,800 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 $ 41 because the Chair Division would not be willing to pay more than the price for which it can purchase the cushions from an outside vendor. Using the transfer price you determined, calculate the total contribution margin for the quarter. Total contribution margin Number of units 1800 Contribution margin per unit 45 Chair Division Cushion Division-external 1800 18 Cushion Division-internal 1800 16 Total Choose from any list or enter any number in the input fields and then continue to the next question. ement 3. Assume the Chair Division purchases the 1,800 cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company? (Enter "0" for any zero am Requirements More Info division n Division ement 4. Revid The Chair Division currently purchases the cushions for $30 from an outside vendor. The Cushion Division manufactures upholstered seat cushions that are sold to customers outside the company. The Chair Division currently sells 1,800 chairs per quarter, and the Cushion Division is operating at capacity, which is 1,800 cushions per quarter. The two divisions report the following information: st option for CY Chair Division Cushion Division ng the Chair D 1. Determine the total contribution margin for Cutler Company for the quarter. 2. Assume the Chair Division purchases the 1,800 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 1,800 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 Cutler Company? 5. Assume the Cushion Division has capacity of 3,600 cushions per quarter and can continue to supply its outside customers with 1,800 cushions per quarter and also supply the Chair Division with 1,800 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 Sales Price per Chair $ 100 $ 34 Sales Price per Cushion Variable Cost per Cushion Variable Cost (other than cushion) 16 r quar ement 5. Assul price should 25 30 Variable Cost cushion) $ 45 $ 18 Company shoy ce for which it Contribution Margin per Chair Contribution Margin per Cushion he transfer prid Print Done Print Done Division n Division-external TOUU TO n Division-internal 1800 16
