Exercise 11-7 (Algo) Transfer Pricing from the Viewpoint of the Entire Company (L011-3] Division A manufactures electronic circuit boards. The boards can be sold either to Division of the same company or to outside customers. Last year, the following activity occurred in Division A: s $ 184 122 Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Seld to outside customers Sold to Division 3 20,900 15, 300 5,600 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in a electronic instrument manufactured by that division (one board per instrument). Division B incurred $220 in additional variable cost instrument and then sold the instruments for $660 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 20,900 circuit boards. Next year, Division B wants to purchase 6,600 circuit boards from Division A rather than 5,600. (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 to sell them to outside customers? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the net operating incomes camed by Division A. Division B, and the company as a whole. Division A Division B Total Company on Sold @ Division 3 15.300 5,600 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 Bincurred $220 in additional variable cost pe instrument and then sold the instruments for $660 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 20,900 circuit boards. Next year , Division B wants to purchase 6.600 circuit boards from Division A rather than 5,600. (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 to sell them to outside customers? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the net operating incomes earned by Division A Division B, and the company as a whole. Division A Division B Total Company Sales Expenses Addedzy the division Transfer price paid Total expenses Net operating income 0 0 0 0 $ $ 0 $ 0 Required 2 > Boud to outside customers Sold to Division B 15, 300 5,600 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 Bincurred $220 in additional variable cost per instrument and then sold the instruments for $660 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 20,900 circuit boards. Next year. Division B wants to purchase 6,600 circuit boards from Division A rather than 5,600. (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 to sell them to outside customers? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assume Division A's manufacturing capacity is 20,900 circuit boards. Next year, Division B wants to purchase 6,600 circuit boards from Division A rather than 5,600. (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 additional 1,000 circuit boards to Division B or continue to sell them to outside customers? Show less Continue to sell the additional 1,000 circuit boards to outside customers. O Sell the 1.000 additional circuit boards to Division B
