Flowers and Flowers, Inc., has two divisions. Division A has an investment base
ID: 2481351 • Letter: F
Question
Flowers and Flowers, Inc., has two divisions. Division A has an investment base of $1,350,000 and produces (and sells) 189,000 units of Eyne at a market price of $24.00 per unit. Variable costs total $7.20 per unit, and fixed charges are $5.00 per unit (based on a capacity of 234,250 units). Division B wants to purchase 53,000 units of Eyne from Division A. However, Division B is only willing to pay $15.60 per unit.
Flowers and Flowers, Inc., has two divisions. Division A has an investment base of $1,350,000 and produces (and sells) 189,000 units of Eyne at a market price of $24.00 per unit. Variable costs total $7.20 per unit, and fixed charges are $5.00 per unit (based on a capacity of 234,250 units). Division B wants to purchase 53,000 units of Eyne from Division A. However, Division B is only willing to pay $15.60 per unit.
What is the contribution margin for Division A without the transfer to Division B?Explanation / Answer
DESCRIPTION AMOUNT SALES (189000 * $24) $4536000 LESS VARIABLE COST (189000 * $7.20) ($1360800) CONTRIBUTION MARGIN $3175200
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