Exercise 11-7 (Static) 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 B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board 5 125 Variable cost per circuit board $ 90 Number of circuit boards: Produced during the year 20,000 Sold to outside customers 16,000 Sold to Division B 4,000 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 $100 in additional variable cost per instrument and then sold the instruments for $300 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 20,000 circuit boards. Next year, Division B wants to purchase 5,000 circuit boards from Division A rather than 4,000. (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? Required 1 Required 2 Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. Expenses: Added by the division Transfer price paid Total expenses Net operating income Required 2 > Required 1 Requiredz Assume Division A's manufacturing capacity is 20,000 circuit boards. Next year, Division B wants to purchase 5,000 circuit boards from Division A rather than 4,000. (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 IessA OContinue to sell the additional 1,000 circuit boards to outside customers. OSell the 1000 additional circuit boards to Division B.