Exercise $11-7($Algo$)$ Transfer Pricing from the Viewpoint of the Entire Company $[$L$011-3]$

Division A manufactures electronic circult boards that can be sold to Division B of the same company or to outside customers. Last

year, the following actlvity occurred in Division A:

Sales to Division B were at the same price as sales to outside customers. The circult boards purchased by Division B were used in an

electronic Instrument manufactured by that division $($one board per Instrument$).$ Division B Incurred $$230$ in additional varlable cost per

Instrument and then sold the Instruments for $$680$ each.

Requlred:

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 $20,500$ circult boards. Next year, Division B wants to purchase $5,900$ circult boards

from Division A rather than $4,900.($Circult boards of this type are not avallable from outside sources.$)$ From the standpoint of the

company as a whole, should Division A sell the $1,000$ additional circult boards to Division B or continue selling them to outside

customers?

Complete this question by entering your answers in the tabs below.

Calculate the net operating incomes earned by Division A$,$ Division $B,$ and the company as a whole.