The Dutton Company is decentralized, and divisions are considered investment centers. Dutton 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.

More info

The Chair Division currently purchases the cushions for $ from an outside vendor. The Cushion Division manufactures upholstered seat cushions that are sold to customers outside the company. The Chair Division currently sells comma chairs per quarter, and the Cushion Division is operating at capacity, which is comma cushions per quarter. The two divisions report the following information:

Chair Division

Cushion Division

Sales Price per Chair

$

Sales Price per Cushion

$

Variable Cost other than cushion

Variable Cost per Cushion

Variable Cost cushion

Contribution Margin per Chair

$

Contribution Margin per Cushion

$Requirements

Determine the total contribution margin for Dutton Company for the quarter.

Assume the Chair Division purchases the comma cushions needed from the Cushion Division at its current sales price. What is the total contribution margin for each division and the company?

Assume the Chair Division purchases the comma cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company?

Review your answers for Requirements and What is the best option for Dutton Company

Assume the Cushion Division has capacity of comma cushions per quarter and can continue to supply its outside customers with comma cushions per quarter and also supply the Chair Division with comma cushions per quarter. What transfer price should Dutton Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quRequirement Determine the total contribution margin for Dutton Company for the quarter.