Valencia Products is a decentralized organization that evaluates divisional management based on measures of divisional contribution margin. Consumer Audio (CA) Division and Auto Electronics (AE) Division both sell audio equipment. CA focuses on home and personal audio equipment; AE focuses on components for automobile stereo systems. CA produces an audio player that it can sell to the outside market for $92 per unit. The outside market can absorb up to 80,000 units per year. These units require 4 direct labor-hours each. If CA modifies the units with an additional hour of labor time, it can sell them to AE for $85 per unit. AE will accept up to 70,000 of these units per year. If AE does not obtain 70,000 units from CA, it purchases them for $90 each from the outside. AE incurs $40 of additional labor and other out-of-pocket costs to convert the player into one that fits in the dashboard and integrates with the automobile's audio system. The units can be sold to the outside market for $225 each. CA estimates that its total costs are $4,625,000 for fixed costs, $12 per direct labor-hour, and $6 per audio player for materials and other variable costs besides direct labor. Its capacity is limited to 400,000 direct labor-hours per year.

Required: Determine the following:

(a) Total contribution margin to CA if it sells 80,000 units outside: Total Contribution Margin:___________

(b) Total contribution margin to CA if it sells 70,000 units to AE. Total Contribution Margin:___________

(c) & (d)The costs to be considered in determining the optimal company policy for sales by CA. THe annual contributions and costs for CA and AE under the optimal policy.

	CA Division	AE Division	Company
Sales by CA to outside
Sales by CA to AE
Sales by AE to outside
Total Sales
Cost of Materials, etc. in CA
Cost of labor in CA
Cost of units transferred to AE
Cost of units purchased from outside by AE
Conversion cost in AE
Contribution