es Exercise 11-7 (Algo) Transfer Pricing from the Viewpoint of the Entire Company [LO11-3] 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 $ 179 $ 120 21,400 14,500 6,900 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 21,400 circuit boards. Next year, Division B wants to purchase 7,900 circuit boards from Division A rather than 6,900. (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. Division A Division B Total Company Sales Expenses: Added by the division Transfer price paid Total expenses 0 0 0 Net operating income $ 0 $ 0 $ 0 < Required 1 Required 2 >
es Exercise 11-7 (Algo) Transfer Pricing from the Viewpoint of the Entire Company [LO11-3] 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 $ 179 $ 120 21,400 14,500 6,900 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 21,400 circuit boards. Next year, Division B wants to purchase 7,900 circuit boards from Division A rather than 6,900. (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. Division A Division B Total Company Sales Expenses: Added by the division Transfer price paid Total expenses 0 0 0 Net operating income $ 0 $ 0 $ 0 < Required 1 Required 2 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![es
Exercise 11-7 (Algo) Transfer Pricing from the Viewpoint of the Entire Company [LO11-3]
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
$ 179
$ 120
21,400
14,500
6,900
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 21,400 circuit boards. Next year, Division B wants to purchase 7,900 circuit boards
from Division A rather than 6,900. (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.
Division A Division B Total Company
Sales
Expenses:
Added by the division
Transfer price paid
Total expenses
0
0
0
Net operating income
$
0
$
0
$
0
< Required 1
Required 2 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbfd18874-c6d8-4435-921a-5693b6b434e5%2F01e0f76c-22dc-498c-9c16-76277aec90d2%2Fxct117_processed.png&w=3840&q=75)
Transcribed Image Text:es
Exercise 11-7 (Algo) Transfer Pricing from the Viewpoint of the Entire Company [LO11-3]
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
$ 179
$ 120
21,400
14,500
6,900
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 21,400 circuit boards. Next year, Division B wants to purchase 7,900 circuit boards
from Division A rather than 6,900. (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.
Division A Division B Total Company
Sales
Expenses:
Added by the division
Transfer price paid
Total expenses
0
0
0
Net operating income
$
0
$
0
$
0
< Required 1
Required 2 >
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