Question

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 193 112 21,900 15,000 6,900 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 $260 in additional variable cost per instrument and then sold the instruments for $670 each. Required: 1. Prepare income statements for Division A, Division B, and the company as a whole. 2. Assume Division A's manufacturing capacity is 21,900 circuit boards. Next year, Division B wants to purchase 7,900 circuit boards from Division A rather than 6,900. (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 additional 1,000 circuit boards to Division B or continue to sell them to outside customers?

no work needed just correct and completed answers please and thank you

Answer 1

(a)

(b) Sell the 1,000 additional circuit boards to Division B

Division A Division B Total Company Sales $ 42,26,700.00 $ 46,23,000.00 $ 75,18,000.00 Expenses: Added by the division $ 24,52,800.00 $ 17,94,000.00 $ 42,46,800.00 Transfer Price Paid $ - $ 13,31,700.00 $ Total Expenses $ 24,52,800.00 $ 31,25,700.00 $ 42,46,800.00 Net Operating Income $ 17,73,900.00 $ 14,97,300.00 $ 32,71,200.00