Division A manufactures electronic circuit boards. The boards can be sold either 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 $ 192 $ 127 21,100 14,300 6,800 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 $220 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 21,100 circuit boards. Next year, Division B wants to purchase 7,800 circuit boards from Division A rather than 6,800. (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 to sell them to outside customers?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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3
Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside
customers. Last year, the following activity occurred in Division A:
Book
Hint
Print
eferences
Mc
Graw
Hill
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
4
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 $220 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 21,100 circuit boards. Next year, Division B wants to purchase 7,800 circuit boards
from Division A rather than 6,800. (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 to sell them to outside
customers?
Required 1 Required 2
Complete this question by entering your answers in the tabs below.
Sales
Expenses:
Calculate the net operating incomes earned by Division A, Division B, and the company as a whole.
Total Company
Added by the division
Transfer price paid
Total expenses
Net operating income
ype here to search
t
$ 192
$127
Division A
21,100
14,300
5,800
$
C
0
0 $
Division B
10
0 $
*Required t
HE
0
0
Required 2 >
< Prev.
8 of 10
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Transcribed Image Text:3 Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Book Hint Print eferences Mc Graw Hill 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 4 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 $220 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 21,100 circuit boards. Next year, Division B wants to purchase 7,800 circuit boards from Division A rather than 6,800. (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 to sell them to outside customers? Required 1 Required 2 Complete this question by entering your answers in the tabs below. Sales Expenses: Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. Total Company Added by the division Transfer price paid Total expenses Net operating income ype here to search t $ 192 $127 Division A 21,100 14,300 5,800 $ C 0 0 $ Division B 10 0 $ *Required t HE 0 0 Required 2 > < Prev. 8 of 10 Next >
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