Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
image text in transcribed
image text in transcribed
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: $ 192 129 $ 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 21,600 15,800 5,800 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 $270 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 21,600 circuit boards. Next year, Division B wants to purchase 6,800 circuit boards from Division A rather than 5,800. (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 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: Added by the division Transfer price paid Total expenses Net operating income 0 0 0 $ 0 $ 0 $ 0 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assume Division A's manufacturing capacity is 21,600 circuit boards. Next year, Division B wants to purchase 6,800 circuit boards from Division A rather than 5,800. (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 A Continue to sell the additional 1,000 circuit boards to outside customers. Sell the 1,000 additional circuit boards to Division B.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing A Practical Approach

Authors: Fiona Campbell, Robyn Moroney, Jane Hamilton, Valerie Warren

2nd Canadian edition

9781118377901, 1118377907, 1119048095, 978-1118849415

More Books

Students also viewed these Accounting questions

Question

What is the work product rule?

Answered: 1 week ago

Question

=+1. What is the quality of your organization's performance?

Answered: 1 week ago

Question

Identify some of the global differences when negotiating.

Answered: 1 week ago

Question

Describe the team performance model.

Answered: 1 week ago