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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 Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B 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 $300 in additional variable cost per instrument and then sold the instruments for $620 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 5,900 circuit boards from Division A rather than 4,900. (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 Complete this question by entering your answers in the tabs below. Sales Expenses: Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. Total Company Added by the division Transfer price paid $184 $ 113 20,000 15,100 4,900 Total expenses Net operating income Division A $ Division B 0 0 $ 0 0 $ 0 0

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 Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B 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 $300 in additional variable cost per instrument and then sold the instruments for $620 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 5,900 circuit boards from Division A rather than 4,900. (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 Complete this question by entering your answers in the tabs below. Sales Expenses: Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. Total Company Added by the division Transfer price paid $184 $ 113 20,000 15,100 4,900 Total expenses Net operating income Division A $ Division B 0 0 $ 0 0 $ 0 0

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 28P
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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 Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B 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 $300 in additional variable cost per instrument and then sold the instruments for $620 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 5,900 circuit boards from Division A rather than 4,900. (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 Complete this question by entering your answers in the tabs below. Sales Expenses: Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. Total Company Added by the division Transfer price paid $184 $113 20,000 15, 100 4,900 Total expenses Net operating income Division A $ Division B 0 0 $ 0 0 $ 0 0
Transcribed Image Text: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 Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B 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 $300 in additional variable cost per instrument and then sold the instruments for $620 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 5,900 circuit boards from Division A rather than 4,900. (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 Complete this question by entering your answers in the tabs below. Sales Expenses: Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. Total Company Added by the division Transfer price paid $184 $113 20,000 15, 100 4,900 Total expenses Net operating income Division A $ Division B 0 0 $ 0 0 $ 0 0
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