The following question is for manegerial accounting

101:] as P1341 Transfer Price, Company Versus Division Profit, Idle Capacity The furniture division of International Woodworking purchases lumber and makes tables, chairs, and other wood hintimre. Most of the lumber is purchased from the Portneuf Mill, also a division of International Woodworldng. The furniture division and the Portneuf Mill are prot centres. The furniture division manager proposed a new Danishdesigned chair that will sell for $150. The manager wants to purchase the lumber from the Portoeuf Mill. Production of 300 chairs is planned, using capacity in the furniture division that is currently idle. The furniture division can purchase the lumber for each chair from an outside supplier for $50. International Woodworkers has a policyr that internal transfers are priced at variable cost plus allocated xed costs. Assume the following costs for the production of one chair: PortoeuiMill thtnre Division W cost 54D mole costs: Allocated sitcoms 3e Lumber covenant s as Fully absorbed cost see Furniture dimon mist: casts: We as Selling to Total variable cost 5155 REQUIRED A. Assume that the PormEf Mill has idle capacity and would incur no additional fixed costs to produce the required lumber. Would the furniture division manager buy the lumber for the chair from the PoMeuf Mill, given the existing transfer price policy? Why or whv not? B. Calculate the contribution margin for the company as a whole if the manager decides to buy from the Portoeuf hiill and is able to sell 300 chairs. C. What transfer price policy would you recommend if the Pormeuf Mill always has idle (excess) capacity? Explain why this transfer price policy provides incentives for the managers to act in the best interests of the company as a whole. D. Explain how the idle capacity affects the recommendation in Part C. ICQ if