Elsinore Electronics is a decentralized organization thatevaluates divisional management based on measures of divisionalcontribution margin. Home Audio (Home) Division and MobileElectronics (Mobile) Division both sell electronic equipment,primarily for video and audio entertainment. Home focuses on homeand personal equipment; Mobile focuses on components for automobileand other, nonresidential equipment. Home produces an audio playerthat it can sell to the outside market for $72 per unit. Theoutside market can absorb up to 90,000 units per year. These unitsrequire 3 direct labor-hours each.

If Home modifies the units with an additional hour of labortime, it can sell them to Mobile for $81 per unit. Mobile willaccept up to 78,000 of these units per year.

If Mobile does not obtain 78,000 units from Home, it purchasesthem for $84 each from the outside. Mobile incurs $36 of additionallabor and other out-of-pocket costs to convert the player into onethat fits in the dashboard and integrates with the automobile’saudio system. The units can be sold to the outside market for $203each.

Home estimates that its total costs are $1,080,000 for fixedcosts, $14.40 per direct labor-hour, and $7.20 per audio player formaterials and other variable costs besides direct labor. Itscapacity is limited to 375,000 direct labor-hours per year.

Required:

Determine the following:

a. Total contribution margin to Home if itsells 90,000 units outside. (Do not round intermediatecalculations.)

	Totalcontribution margin

b. Total contribution margin to Home if it sells78,000 units to Mobile. (Do not round intermediatecalculations.)

	Totalcontribution margin

(c) & (d). The costs to be considered indetermining the optimal company policy for sales by Home.

The annual contributions and costs for Home and Mobile under theoptimal policy.

	Home Mobile Company Sales byHome to outside Sales byHome to Mobile Sales byMobile to outside Totalsales $0 $0 $0 Cost ofmaterials, etc. in Home Cost oflabor in Home Cost ofunits transferred to Mobile Cost ofunits purchased from outside by Mobile Conversion cost in Mobile Contribution $0 $0 $0