Question

Good Evening,

I would like assistance with requirement 4.

- and divisions are considered investment centers. Click the icon to view additional information.) L : em More Info nti The Chair Division currently purchases the cushions for $20 from an outside vendor. The Cushion Division manufactures upholstered seat cushions that are sold to customers outside the company. The Chair Division currently sells 1,400 chairs per quarter, and the Cushion Division is operating at capacity, which is 1,400 cushions per quarter. The two divisions report the following information: Chair Division Cushion Division $ $ 30 Sales Price per Chair Variable Cost (other than cushion) 80 42 Sales Price per Cushion Variable Cost per Cushion bntribut Variable Cost (cushion) 20 its $ Contribution Margin per Chair 18 Contribution Margin per Cushion Print Print Done Done no IT ITU TIPU TUUU unu MITUNTUNUTTUU Novo.

Answer 1

The best option is current scenario I.e. requirement 1

The company would generate more in total contribution margin than internally

The price should be set at the price for which it can purchase the cushions from the outside vendor because the chair division would not be willing to pay more than that

Total contribution margin

Chair division =$25200

Cushion Division outside - 28000

Internally (20-10)*14000 =$14000

Total contribution margin =$67,200