The Greco Company is decentralized, and divisions are considered investment centers. Greco 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. (Click the icon to view additional information.) Read the requirements. Requirement 1. Determine the total contribution margin for Greco Company for the quarter. Chair Division Cushion Division Total Number of units x Contribution margin per unit Total contribution margin X = Requirement 2. Assume the Chair Division purchases the 1,100 cushions needed from the Cushion Division at its current sales price. What is the total contribution margin for each division and the company? Chair Division Cushion Division Number of units Contribution margin per unit Total contribution margin More info The Chair Division currently purchases the cushions for $15 from an outside vendor. The Cushion Division manufactures upholstered seat cushions that are sold to customers outside the company. The Chair Division currently sells 1,100 chairs per quarter, and the Cushion Division is operating at capacity, which is 1,100 cushions per quarter. The two divisions report the following information: Chair Division Cushion Division Sales Price per Chair $ 85 Sales Price per Cushion 22 Variable Cost (other than cushion) 51 Variable Cost per Cushion 8 15 Variable Cost (cushion) $ 19 $ 14 Contribution Margin per Chair Contribution Margin per Cushion Number of units Contribution margin per unit Total contribution margin x = Chair Division Cushion Division Total Requirement 2. Assume the Chair Division purchases the 1,100 cushions needed from the Cushion Division at its current sales price. What is the total contribution margin for each division and the company? Chair Division Cushion Division. Total Number of units Contribution margin per unit Total contribution margin Requirement 3. Assume the Chair Division purchases the 1,100 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 amounts.) Chair Division Number of units x Contribution margin per unit x Total contribution margin Cushion Division Total x Requirement 4. Review your answers for Requirements 1, 2, and 3. What is the best option for Greco Company? The best option for Greco is By having the Chair Division purchase the cushions from an outside vendor, the company would generate division purchases cushions internally. in total contribution margin than if the Requirement 5. Assume the Cushion Division has capacity of 2,200 cushions per quarter and can continue to supply its outside customers with 1,100 cushions per quarter and also supply the Chair Division with 1,100 cushions per quarter. What transfer price should Greco Company set? Explain your reasoning. Using the transfer orice vou determined. calculate the total contribution margin for the quarter. Requirement 4. Review your answers for Requirements 1, 2, and 3. What is the best option for Greco Company? The best option for Greco is By having the Chair Division division purchases cushions Requirement 5. Assume the cushions per quarter and als reasoning. Using the transfer culator the current scenario (Requirement 1). for the Chair Division to purchase cushions internally at the current sales price (Requirement 2). for the Chair Division to purchase cushions internally at the current variable cost (Requirement 3). By having the Chair Division purchase the cushions from an outside vendor, the company would generate division purchases cushions internally. in total contribution margin than if the Requirement 5. Assume the Cushion Division has capacity of 2,200 cushions per quarter and can continue to supply its outside customers with 1,100 cushions per quarter and also supply the Chair Division with 1,100 cushions per quarter. What transfer price should Greco Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Greco 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. Chair Division Cushion Division-external Cushion Division-internal Total Number of units Contribution margin per unit = Total contribution margin: =