Calculate the net operating incomes earned by Division A, Division B, and the company as...
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Calculate the net operating incomes earned by Division A, Division B, and the company as a whole.
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Exercise 11-7 (Static) Transfer Pricing from the Viewpoint of the Entire Company [LO11-3] Division A manufactures electronic circuit boards that can be sold to Division B of the same company or to outside customers. Last. year, the following activity occurred in Division A: 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 carned 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 avaliable from outside sources.) From the standpoint of the company as a whole, should Division A sell the 1,000 additional circult boards to Division B or continue selling them to outside customers? Complete this question by entering your answers in the tabs below. 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 selling them to outside customers? Complete this question by entering your answers in the tabs below. Calculate the net operating incomes earned by Division A, Division B, and the company as a whole
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