Exercise $11-7($Algo$)$ Transfer Pricing from the Viewpoint of the Entire Company $[$LO$11-3]$

Division A manufactures electronic circult boards. The boards can be sold elther 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

$$270$ in additional variable cost per instrument and then sold the instruments for $$650$ each.

Required:

Calculate the net operating incomes earned by Division A $,$ Division B $,$ and the company as a whole.

$2$ Assume Division A$\text{'}$s manufacturing capacity is $21,300$ circuit boards. Next year, Division B wants to purchase $7,400$

circuit boards from Division A rather than $6,400.($Circult boards of this type are not avallable 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?

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.