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The Chair Division currently purchases the cushions for S26 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: t its current variable cost. What is the total pin Chair Division Cushion Division Sales Price per Chair $ 85 Sales Price per Cushion 30 Variable Cost (other than cushion) 40 Variable Cost per Cushion 10 26 Variable Cost (cushion) 19 Contribution Margin per Cushion 20 Contribution Margin per Chair Print Done e 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 Conti Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Conti Company should set the transfer price at | because the Chair Division would not be willing to pay more than the price for which it can purchase the cushions from an outside vendor. %24

The Chair Division currently purchases the cushions for S26 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: t its current variable cost. What is the total pin Chair Division Cushion Division Sales Price per Chair $ 85 Sales Price per Cushion 30 Variable Cost (other than cushion) 40 Variable Cost per Cushion 10 26 Variable Cost (cushion) 19 Contribution Margin per Cushion 20 Contribution Margin per Chair Print Done e 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 Conti Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Conti Company should set the transfer price at | because the Chair Division would not be willing to pay more than the price for which it can purchase the cushions from an outside vendor. %24

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
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I just need requirement 5 for the transfer price please.

The Conti Company is decentralized, and divisions are considered investment centers. Conti 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. i Click the icon to view additional information.) Read the requirements. Requirement 1. Determine the total contribution margin for Conti Company for the quarter. Number of units * Contribution margin per unit = Total contribution margin Chair Division 1,100 x $ 19 $ 20,900 Cushion Division 1,100 20 $ 22,000 $ 42,900 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? Number of units Contribution margin per unit = Total contribution margin Chair Division 1,100 x $ 15 = $ 16,500 Cushion Division 1,100 $ 20 $ 22,000 $ 38,500 Total 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.) Number of units Contribution margin per unit = Total contribution margin Chair Division 1,100 x $ 35 = $ 38,500 Cushion Division 1,100 38,500 Total Requirement 4. Review your answers for Requirements 1, 2, and 3. What is the best option for Conti Company? The best option for Conti is the current scenario (Requirement 1). By having the Chair Division purchase the cushions from an outside vendor, the company would generate more in total contribution margin than if the division purchases cushions internally.
Transcribed Image Text:The Conti Company is decentralized, and divisions are considered investment centers. Conti 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. i Click the icon to view additional information.) Read the requirements. Requirement 1. Determine the total contribution margin for Conti Company for the quarter. Number of units * Contribution margin per unit = Total contribution margin Chair Division 1,100 x $ 19 $ 20,900 Cushion Division 1,100 20 $ 22,000 $ 42,900 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? Number of units Contribution margin per unit = Total contribution margin Chair Division 1,100 x $ 15 = $ 16,500 Cushion Division 1,100 $ 20 $ 22,000 $ 38,500 Total 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.) Number of units Contribution margin per unit = Total contribution margin Chair Division 1,100 x $ 35 = $ 38,500 Cushion Division 1,100 38,500 Total Requirement 4. Review your answers for Requirements 1, 2, and 3. What is the best option for Conti Company? The best option for Conti is the current scenario (Requirement 1). By having the Chair Division purchase the cushions from an outside vendor, the company would generate more in total contribution margin than if the division purchases cushions internally.
The Chair Division currently purchases the cushions for S26 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: t its current variable cost. What is the total pin Chair Division Cushion Division Sales Price per Chair 85 Sales Price per Cushion $ 30 Variable Cost (other than cushion) 40 Variable Cost per Cushion 10 26 Variable Cost (cushion) Contribution Margin per Chair 19 Contribution Margin per Cushion Print Done e 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 Conti Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Conti Company should set the transfer price at | because the Chair Division would not be willing to pay more than the price for which it can purchase the cushions from an outside vendor. 20 %24 %24 %24
Transcribed Image Text:The Chair Division currently purchases the cushions for S26 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: t its current variable cost. What is the total pin Chair Division Cushion Division Sales Price per Chair 85 Sales Price per Cushion $ 30 Variable Cost (other than cushion) 40 Variable Cost per Cushion 10 26 Variable Cost (cushion) Contribution Margin per Chair 19 Contribution Margin per Cushion Print Done e 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 Conti Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Conti Company should set the transfer price at | because the Chair Division would not be willing to pay more than the price for which it can purchase the cushions from an outside vendor. 20 %24 %24 %24
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