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Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year,
Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per $ 177 circuit board Variable cost per $ 120 circuit board Number of circuit boards: Produced during the 20,300 year Sold to outside 15,800 customers Sold to Division B 4,500 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 $620 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 5,500 circuit boards from Division A rather than 4,500. (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 to sell them to outside customers
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