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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 circuit board $
Variable cost per circuit board $
Number of circuit boards:
Produced during the year
Sold to outside customers
Sold Division
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 $ in additional variable cost per
instrument and then sold the instruments for $ each.
Required:
Calculate the net operating incomes earned by Division Division and the company as a whole.
Assume Division As manufacturing capacity is circuit boards. Next year, Division B wants to purchase circuit boards
from Division A rather than 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 additional circuit boards to Division B or continue to sell them to outside
customers?
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