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How do calculate division b contribution margin

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Reference no: EM132719651

Twyla Company is a multidivisional company. It's managers have full responsibility for profit and complete utonomy to accept or reject transfers from other divisions. Division A produces for a final product that is sold outside at $2,400. Division A charges Division B market price for the part, which is $1,500 per unit. Variable costs are $1,100 and $1,200 for Divisions A and B, respectively. The manager of Division B feels that Division A should transfer the part at a lower price than market because at market, Division B is unable to make a profit.

Problem 1: Calculate Division B's contribution margin if transfers are made at the market price, and calculate the company's total contribution margin.

Problem 2: Assume that Division A can sell all its production in the open market. Should Division A transfer the goods to Division B? If so, at what price?

Reference no: EM132719651

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