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 $189 $ 120 20,300 14,500 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 $300 in additional variable cost per instrument and then sold the instruments for $690 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 20,300 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 selling them to outside customers?
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 $189 $ 120 20,300 14,500 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 $300 in additional variable cost per instrument and then sold the instruments for $690 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 20,300 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 selling them to outside customers?
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
$ 189
$ 120
20,300
14,500
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 $300 in additional variable cost per
instrument and then sold the instruments for $690 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 20,300 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 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
Division A
Division B Total Company
Total expenses
0
0
0
Net operating income
$
0
$
0
$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b133660-e532-4768-ae21-775f5cad2faa%2Fcd0b789b-79a6-49db-a55b-56250ebb374b%2F4xd16sr_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
$ 189
$ 120
20,300
14,500
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 $300 in additional variable cost per
instrument and then sold the instruments for $690 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 20,300 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 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
Division A
Division B Total Company
Total expenses
0
0
0
Net operating income
$
0
$
0
$
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