all the info is posted below... right click on images u cannot see well and choo
ID: 2596069 • Letter: A
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all the info is posted below...
right click on images u cannot see well and chooes open in new tab - thank you for all your help!
The Greco Company is decentralized, and divisions are considered investment centers. Greco 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 (Click the icon to view additional information.) Read the reguirements Requirement 1. Determine the total contribution margin for Greco 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 500 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 Contribution margin per unit Total contribution margin x = Chair Division Cushion Division Total Requirement 3. Assume the Chair Division purchases the 500 cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company? (Enter "O" for any zero amounts.) (Click the icon to view additional information.) Read the requirements 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 Greco Company? The best option for Greco is By having the Chair Division purchase the cushions from an outside vendor, the company would generate in total contribution margin than if the division purchases cushions internally Requirement 5. Assume the Cushion Division has capacity of 1,000 cushions per quarter and can continue to supply its outside customers with 500 cushions per quarter and also supply the Chair Division with 500 cushions per the current scenario (Requirement 1). for the Chair Division to purchase cushions internally at the current sales price (Requirement 2) for the Chair Division to purchase cushions internally at the current variable cost (Requirement 3) quarter. What transfer price should Greco Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Greco Company should set the transfer price at S 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 TotalExplanation / Answer
Chair Division Cushion Division Sales Price 90 32 VC 56 17 Purchase Cost 30 Contribution PU 4 15 Chair Division Cushion Division Current Sales 500 500 1 No of Units Contribution PU Total Chair Division 500 4 2000 Cushion Division 500 15 7500 9500 2 Chair Division Cushion Division Sales Price 90 32 VC 56 17 Purchase Cost 32 (Revised) Contribution PU 2 15 No of Units Contribution PU Total Chair Division 500 2 1000 Cushion Division 500 15 7500 8500 3 Chair Division Cushion Division Sales Price 90 17 VC 56 17 Purchase Cost 17 (Revised)-VC Contribution PU 17 0 No of Units Contribution PU Total Chair Division 500 17 8500 Cushion Division 500 0 0 8500 4 Results in Different Options: Options Total Contribution 1 9500 Best Option 2 8500 3 8500 Both Division should sell to external customers and Chair division should purchase from outside supplier 5 Cushion Division: Total Capacity 1000 Market available for its product 500 Ideal Capacity 500 Since it is a ideal capacity(External market not available) The Minimum transfer price should be limited to Variable cost only. So Transfer Price= Variable Cost So Transfer Price= 17 Chair Division Cushion Division External Sales Internal Sales Sales Price 90 32 17 VC 56 17 17 Purchase Cost 30 (Revised)-VC Contribution PU 4 15 0 Units 500 500 500 Total Contribution 2000 7500 0 Total Contribution 9500
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