Chapter 24, Problem P24.31APGA

To determine

Contribution margin is the excess of sales revenue generated over and over above the variable cost incurred for the sales generated. The contribution margin is an amount contributed towards fixed cost and net operating income of the company.

Requirement1:

The part of revenue earned after covering the variable costs.

To determine

Requirement2:

The Total contribution margin when the cushion purchased in-house.

To determine

Requirement3:

The total contribution margin when the transfer is made at current variable cost of cushion division.

To determine

Requirement4:

The options to choose from the alternatives available.

To determine

Requirement5:

The transfer price and total contribution margin earned when the cushion division is having an excess capacity.