The Atlantic Company is a multidivisional company. Its managers have full responsibility for profits and complete Autonomy to accept or reject transfers from other divisions. Division A produces a sub-assembly part for which there is a competitive market. Division B currently uses this sub-assembly for a final product that is sold outside at $2,420. Division A charges division B market price for the part, which is $1,440 per unit. Variable costs are $1,040 and $1,180 for divisions A and B, respectively.

The manager of division B feels that division A should transfer the part at a lower price than market because, at market, division B is unable to make a profit.

Calculate division B's contribution margin if transfers are made at the market price, and calculate the company's total contribution margin.(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Division B's contribution margin: ___ $

Company's total contribution margin: ___ $

Assume that division A can sell all its production in the open market. Should division A transfer the goods to division B?

Yes or No

If so, at what price?(If no transfer should be made, please enter 0. Do not leave any fields blank.)

Transfer Price: ___ $

Compare the contribution margins under three different alternatives. Assume that division A can sell in the open market only 510 of the 1,020 units it can produce every month, at $1,440 per unit. Assume also that a 20% reduction in price is necessary to sell all 1,020 units each month. Assume transfers are made and the price is maintained.

AlternativesContribution Margin

Maintain price and no transfers: ___ $

Cut price and no transfers: ___ $

Maintain price and transfers: ___ $

Should transfers be made?

Yes or No

If so, how many units should the division transfer and at what price?

Units transferred:

Price within the range ___ $ to ___ $