Division A manufactures electronic circuit boards that can be sold to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B $ 189 $ 117 20,900 14,500 6,400 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic Instrument manufactured by that division (one board per Instrument). Division B Incurred $290 In additional variable cost per Instrument and then sold the Instruments for $650 each. Required: 1. Calculate the net operating Incomes earned by Division A, Division B, and the company as a whole. 2. Assume Division A's manufacturing capacity is 20,900 circuit boards. Next year, Division B wants to purchase 7,400 circuit boards from Division A rather than 6,400. (Circuit boards of this type are not available from outside sources.) From the standpoint of the company as a whole, should Division A sell the 1,000 additional circuit boards to Division B or continue selling them to outside customers? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. Sales Expenses: Added by the division Transfer price paid Total expenses Net operating income Division A Division B Total Company < Required 1 Required 2 >
Division A manufactures electronic circuit boards that can be sold to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B $ 189 $ 117 20,900 14,500 6,400 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic Instrument manufactured by that division (one board per Instrument). Division B Incurred $290 In additional variable cost per Instrument and then sold the Instruments for $650 each. Required: 1. Calculate the net operating Incomes earned by Division A, Division B, and the company as a whole. 2. Assume Division A's manufacturing capacity is 20,900 circuit boards. Next year, Division B wants to purchase 7,400 circuit boards from Division A rather than 6,400. (Circuit boards of this type are not available from outside sources.) From the standpoint of the company as a whole, should Division A sell the 1,000 additional circuit boards to Division B or continue selling them to outside customers? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. Sales Expenses: Added by the division Transfer price paid Total expenses Net operating income Division A Division B Total Company < Required 1 Required 2 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Division A manufactures electronic circuit boards that can be sold to Division B of the same company or to outside customers. Last
year, the following activity occurred in Division A:
Selling price per circuit board
Variable cost per circuit board
Number of circuit boards:
Produced during the year
Sold to outside customers
Sold to Division B
$ 189
$ 117
20,900
14,500
6,400
Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an
electronic Instrument manufactured by that division (one board per Instrument). Division B Incurred $290 In additional variable cost per
Instrument and then sold the Instruments for $650 each.
Required:
1. Calculate the net operating Incomes earned by Division A, Division B, and the company as a whole.
2. Assume Division A's manufacturing capacity is 20,900 circuit boards. Next year, Division B wants to purchase 7,400 circuit boards
from Division A rather than 6,400. (Circuit boards of this type are not available from outside sources.) From the standpoint of the
company as a whole, should Division A sell the 1,000 additional circuit boards to Division B or continue selling them to outside
customers?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Calculate the net operating incomes earned by Division A, Division B, and the company as a whole.
Sales
Expenses:
Added by the division
Transfer price paid
Total expenses
Net operating income
Division A
Division B Total Company
< Required 1
Required 2 >
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