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 $ 188 $ 125 20,200 14,200 6,000 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 $210 in additional variable cost per instrument and then sold the instruments for $640 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 20,200 circuit boards. Next year, Division B wants to purchase 7,000 circuit boards from Division A rather than 6,000. (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 Net operating income Required 1 Required 2 >
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 $ 188 $ 125 20,200 14,200 6,000 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 $210 in additional variable cost per instrument and then sold the instruments for $640 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 20,200 circuit boards. Next year, Division B wants to purchase 7,000 circuit boards from Division A rather than 6,000. (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 Net operating income Required 1 Required 2 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![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
$ 188
$ 125
20,200
14,200
6,000
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 $210 in additional variable cost per
instrument and then sold the instruments for $640 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 20,200 circuit boards. Next year, Division B wants to purchase 7,000 circuit boards
from Division A rather than 6,000. (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
Net operating income
Required 1
Required 2 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd1c76d0c-4967-463f-9083-5dcb20ec4eae%2F790989bc-bc9d-4b59-a0cb-8d3510ca97b1%2F7aabsh_processed.png&w=3840&q=75)
Transcribed Image Text: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
$ 188
$ 125
20,200
14,200
6,000
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 $210 in additional variable cost per
instrument and then sold the instruments for $640 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 20,200 circuit boards. Next year, Division B wants to purchase 7,000 circuit boards
from Division A rather than 6,000. (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
Net operating income
Required 1
Required 2 >
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