Drop down options:

Requirement 4 (pt. 1): the current scenario (requirement 1), for the chair division to purchase cushions internally at the sales price (requirement 2), or the chair division to purchase cushions internally at the variable cost (requirement 3)

Requirement 4 (pt. 2): less, more

Requirement 5: the price for which it can purchase the cushions from an outside vendor, the price for which the cushion division can sell the cushions to outside customers

The Chacon Company is decentralized, and divisions are considered investment centers. Chacon 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 More Info The Chair Division currently purchases the cushions for $30 from an outside vendor. The Cushion Division manufactures upholstered seat cushions that are sold to customers outside the company, The Chair Division currently sells 1.800 chairs per quarter, and the Cushion Division is operating at capacity, which is 1,800 cushions per quarter. The two divisions report the following information: $ $ Cushion Division Sales Price per Cushion Variable Cost per Cushion Chair Division Sales Price per Chair Variable Cost other than cushion) Variable Cost (cushion) Contribution Margin per Chair 32 110 51 30 $_2 Contribution Margin per Cushion i Requirements 1. Determine the total contribution margin for Chacon Company for the quarter. 2. Assume the Chair Division purchases the 1,800 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 1,800 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 Chacon Company? 5. Assume the Cushion Division has capacity of 3,600 cushions per quarter and can continue to supply its outside customers with 1,800 cushions per quarter and also supply the Chair Division with 1,800 cushions per quarter. What transfer price should Chacon Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Requirement 1. Determine the total contribution margin for Chacon Company for the quarter. Number of units X Contribution margin per unit = Total contribution margin Chair Division Cushion Division Total Requirement 2. Assume the Chair Division purchases the 1,800 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 X Contribution margin per unit = Total contribution margin Chair Division Cushion Division Total Requirement 3. Assume the Chair Division purchases the 1,800 cushions needed from the Cushion Division at its curren variable cost. What is the total contribution margin for each division and the company? (Enter "O" for any zero amounts.) Number of units X Contribution margin per unit = Total contribution margin Chair Division Cushion Division Total Requirement 4. Review your answers for Requirements 1, 2, and 3. What is the best option for Chacon Company? The best option for Chacon is in total By having the Chair Division purchase the cushions from an outside vendor, the company would generate contribution margin than if the division purchases cushions internally. Requirement 5. Assume the Cushion Division has capacity of 3,600 cushions per quarter and can continue to supply its outside customers with 1,800 cushions per quarter and also supply the Chair Division with 1,800 cushions per quarter. What transfer price should Chacon Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Chacon 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. Number of units X Contribution margin per unit = Total contribution margin Chair Division Cushion Division-external Cushion Division-internal Total