i Requirements 1. Determine the total contribution margin for Chacon Company for the quarter. 2. Assume the Chair Division purchases the 1,800 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 1,800 cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company? 4. Review your answers for Requirements 1, 2, and 3. What is the best option for Chacon Company? 5. Assume the Cushion Division has capacity of 3,600 cushions per quarter and can continue to supply its outside customers with 1,800 cushions per quarter and also supply the Chair Division with 1,800 cushions per quarter. What transfer price should Chacon Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Requirement 1. Determine the total contribution margin for Chacon 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 1,800 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 X Contribution margin per unit = Total contribution margin Chair Division Cushion Division Total Requirement 3. Assume the Chair Division purchases the 1,800 cushions needed from the Cushion Division at its curren variable cost. What is the total contribution margin for each division and the company? (Enter “O” for any zero amounts.) 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 Chacon Company? The best option for Chacon is in total By having the Chair Division purchase the cushions from an outside vendor, the company would generate contribution margin than if the division purchases cushions internally. Requirement 5. Assume the Cushion Division has capacity of 3,600 cushions per quarter and can continue to supply its outside customers with 1,800 cushions per quarter and also supply the Chair Division with 1,800 cushions per quarter. What transfer price should Chacon Company set? Explain your reasoning. Using the transfer price you determined, calculate the total contribution margin for the quarter. Chacon Company should set the transfer price at $ 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 Total

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