Division A manufactures electronic circuit boards that can be sold to Division 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 were used in an electronic instrument manufactured by that division
one board per instrument Division B incurred $ in additional variable cost per
instrument and then sold the instruments for $ each.
Required:
Calculate the net operating incomes earned by Division A Division B and the company
as a whole.
Assume Division As manufacturing capacity is circuit boards. Next year, Division B
wants to purchase circuit boards from Division A rather than 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 circuit boards to Division B or
continue selling them to outside customers?
