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Exercise 11-7 (Algo) Transfer Pricing from the Viewpoint of the Entire Company (LO11-3] Division A manufactures electronic circuit boards. The boards can be sold either

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Exercise 11-7 (Algo) Transfer Pricing from the Viewpoint of the Entire Company (LO11-3] 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 $ $ 192 113 Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B 21,700 15,600 6.100 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division 8 were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $290 in additional variable cost per instrument and then sold the instruments for $610 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 21700 circuit boards. Next year. Division B wants to purchase 7100 circuit boards from Division A rather than 6.100(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 1000 additional circuit boards to Division B or continue to sell them to outside customers

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