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 $ 191 $ 110 20,400 14,600 5,800 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 $260 in additional variable cost per instrument and then sold the instruments for $660 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 20,400 circuit boards. Next year, Division B wants to purchase 6,800 circuit boards from Division A rather than 5,800. (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?
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 $ 191 $ 110 20,400 14,600 5,800 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 $260 in additional variable cost per instrument and then sold the instruments for $660 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 20,400 circuit boards. Next year, Division B wants to purchase 6,800 circuit boards from Division A rather than 5,800. (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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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please need correct well explained computed and formulated answer with steps and all working for both parts thanks
Transcribed Image Text: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
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 $260 in additional variable cost per
instrument and then sold the instruments for $660 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 20,400 circuit boards. Next year, Division B wants to purchase 6,800 circuit boards
from Division A rather than 5,800. (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
$ 191
$ 110
Complete this question by entering your answers in the tabs below.
20,400
14,600
5,800
Sales
Expenses:
Calculate the net operating incomes earned by Division A, Division B, and the company as a whole.
Division A
Division B Total Company
Added by the division
Transfer price paid
Total expenses
Net operating income
< Required 1
Required 2 >
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