I just need requirement 5 for the transfer price please. The Conti Company is decentralized, and divisions are considered investmentcenters. Conti has one division that manufactures oak dining room chairs withupholstered seat cushions. The Chair Division cuts, assembles, and finishesthe 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 marginChair Division1,100x $19$20,900Cushion Division1,10020$22,000$42,900TotalRequirement 2. Assume the Chair Division purchases the 1,100 cushions needed from the Cushion Division at its current sales price. What is the totalcontribution margin for each division and the company?Number of unitsContribution margin per unit= Total contribution marginChair Division1,100x $15= $16,500Cushion Division1,100$20$22,000$38,500TotalRequirement 3. Assume the Chair Division purchases the 1,100 cushions needed from the Cushion Division at its current variable cost. What is the totalcontribution margin for each division and the company? (Enter "0" for any zero amounts.)Number of unitsContribution margin per unit = Total contribution marginChair Division1,100x $35= $38,500Cushion Division1,10038,500TotalRequirement 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 thedivision purchases cushions internally. The Chair Division currently purchases the cushions for S26 from an outside vendor. The CushionDivision 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 atcapacity, which is 1,100 cushions per quarter. The two divisions report the following information:t its current variable cost. What is the totalpinChair DivisionCushion DivisionSales Price per Chair85 Sales Price per Cushion$30Variable Cost (other than cushion)40 Variable Cost per Cushion1026Variable Cost (cushion)Contribution Margin per Chair19Contribution Margin per CushionPrintDonee in total contribution margin than if theRequirement 5. Assume the Cushion Division has capacity of 2,200 cushions per quarter and can continue to supply its outside customers with 1,100cushions per quarter and also supply the Chair Division with 1,100 cushions per quarter. What transfer price should Conti Company set? Explain yourreasoning. 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 thanthe price for which it can purchase the cushions from an outside vendor.20%24%24%24

Transfer price is the price at which one division of a company transfers goods/services to another…

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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q