The Chair Division currently purchases the cushions for $22 from an outside vendor. The CushionDivision manufactures upholstered seat cushions that are sold to customers outside the company.The Chair Division currently sells 800 chairs per quarter, and the Cushion Division is operating atcapacity, which is 800 cushions per quarter. The two divisions report the following information:Chair DivisionCushion DivisionSales Price per Chair$85 Sales Price per Cushion32Variable Cost (other than cushion)42 Variable Cost per Cushion1322Variable Cost (cushion)$21Contribution Margin per Cushion$19Contribution Margin per Chair%24 The Harris Company is decentralized, and divisions are considered investment centers.Harris has one division that manufactures oak dining room chairs with upholstered seat cushions. TheChair Division cuts, assembles, and finishes the oak chairs and then purchases and attaches the seatcushions.requirements2. Assume the Chair Division purchases the 800 cushions needed from theCushion Division at its current sales price. What is the total contribution marginfor each division and the company?3. Assume the Chair Division purchases the 800 cushions needed from theCushion Division at its current variable cost. What is the total contributionmargin for each division and the company?5. Assume the Cushion Division has capacity of 1,600 cushions per quarter andcan continue to supply its outside customers with 800 cushions per quarter andalso supply the Chair Division with 800 cushions per quarter. What transferprice should Harris Company set? Explain your reasoning. Using the transferprice you determined, calculate the total contribution margin for the quarter.

Answered: Image /qna-images/answer/9bc320b1-0411-4a39-941b-83328bb9c7a7.jpg2.3.5.

2. Assume the Chair Division purchases the 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 800 cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company? 5. Assume the Cushion Division has capacity of 1,600 cushions per quarter and can continue to supply its outside customers with 800 cushions per quarter and also supply the Chair Division with 800 cushions per quarter. What transfer price should Harris Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter.

2. Assume the Chair Division purchases the 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 800 cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company? 5. Assume the Cushion Division has capacity of 1,600 cushions per quarter and can continue to supply its outside customers with 800 cushions per quarter and also supply the Chair Division with 800 cushions per quarter. What transfer price should Harris Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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