Division A manufactures electronic circuit boards that can be sold to Division B of the same company or tooutside customers. Last year, the following activity occurred in Division A:Selling price per circuit board $ 190Variable cost per circuit board $ 119Number of circuit boards:Produced during the yearSold to outside customersSold to Division BSales to Division B were at the same price as sales to outside customers. The circuit boards purchased byDivision B were used in an electronic instrument manufactured by that division (one board perinstrument). Division B incurred $270 in additional variable cost per instrument and then sold theinstruments for $660 each.Required:Calculate the net operating incomes earned by Division A, Division B, and the company as a whole.Assume Division A's manufacturing capacity is 21,500 circuit boards. Next year, Division B wants topurchase 7,600 circuit boards from Division A rather than 6,600. (Circuit boards of this type are notavailable from outside sources.) From the standpoint of the company as a whole, should Division A sell the1,000 additional circuit boards to Division B or continue selling them to outside customers?SalesExpenses:Added by the divisionTransfer price paidTotal expensesNet operating income21,50014,9006,600Show Transcribed TextDivision A$ĆDivision B000 $Total Company00 $00

Net operating income in accounting is a measure that represents the profitability of a company's…

Answered: Sales Expenses: Added by the division…

Sales Expenses: Added by the division Transfer price paid Total expenses Net operating income Division A $ 0 Division B 0 0 $ Total Company 0 0 $ 0 0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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 $ 190
Variable cost per circuit board $ 119
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 $270 in additional variable cost per instrument and then sold the
instruments for $660 each.
Required:
Calculate the net operating incomes earned by Division A, Division B, and the company as a whole.
Assume Division A's manufacturing capacity is 21,500 circuit boards. Next year, Division B wants to
purchase 7,600 circuit boards from Division A rather than 6,600. (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?
Sales
Expenses:
Added by the division
Transfer price paid
Total expenses
Net operating income
21,500
14,900
6,600
Show Transcribed Text
Division A
$
Ć
Division B
0
0
0 $
Total Company
0
0 $
0
0

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Step 3: Requirement 2- Decision related to selling of 1,000 additional circuit boards:

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