The Greco Company is decentralized, and divisions are considered investment centers. Greco has one division that manufactures
Question:
Requirements
1. Determine the total contribution margin for Greco Company for the quarter.
2. Assume the Chair Division purchases the 900 cushions needed from the Cushion Division at its current sales price. What is the total contribution margin for each division and the company?
3. Assume the Chair Division purchases the 900 cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company?
4. Review your answers for Requirements 1, 2, and 3. What is the best option for Greco Company?
5. Assume the Cushion Division has capacity of 1,800 cushions per quarter and can continue to supply its outside customers with 900 cushions per quarter and also supply the Chair Division with 900 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.
Step by Step Answer:
Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura