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:

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 $$670$ each.

Required:

Calculate the net operating incomes earned by Division A$,$ Division B$,$ and the company

as a whole.

Assume Division A$\text{'}$s manufacturing capacity is $21,500$ 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?