Question

Cinton Corporation has two decentralized divions, Alpha and Beta Alpha always has purchased certants rom these units from outside wppliers for 3 peru Bela's cost folow p en Bela plan to the proto 5125 perunt. the price received from h ome d co 5140.000 Annual foots Annual production of these units sold to Alpha forcester ce of 5125 per d e? be the resultinto a. I Alpha buys from an outside supplier the facilities that beta uses to manufacture these units will remain ide. What Clinton Corporations on mag would has a th. Suco C entocessere 593

Answer 1

a.Since there is spare capacity, Contribution margin would decrease by the amount of Buying price - variable cost

i.e. (93-87)*13,000

= $78,000

b.Cost = Margin lost = (125-93)*13,000 = $416,000