a 92060 n e X y Chapter 11 G Divison AN XY e Search Text M Guided Ex J Julie Has

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a 92060 n e X y Chapter 11 G Divison AN XY e Search Text M Guided Ex J Julie Has Jus X e Julie H2S Ju O/1) Noriel, Y/XOffice365 Microsoft C x p Mail Carle x x X X tpx Division A manufactures slectronic circuit boards. The boards can be sold sither 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 $190 $113 Number of circuit boards: Produced during the year Sold to outside customers 21,300 15 800 5.500 Sold to Division B Sales to Division B wrare 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 incurrad 230 in additional variable cost per instrument and then sold the instruments for $690 each Required: 1. Prepare Income statements for Divislon A Dlvislon B, and the company as a whole. Total Sales Expenses: Added by the division Trarnsfer price paid Net operating incomeS 2. Assume that Division A's manufacturing capacity is 21,300 circuit boards. Next year, Division B wants to puchase 6,500 circuit boards from Division A rather than 5,500. Circut boards of this type are not avalable from oulside sources.) What should Division A do from the slandpoint af the company as a whole? Sell the 1,000 additional circut boards to Division B. O Continue to sell the circuit boards to outside customers. Activate Windows Go to PC settings to activate Windows f3d AM 12/16/2017

Explanation / Answer

1.

2.

As the circuit boards are not available from outside suppliers the company gets benefited by selling 1,000 additional units to Division B.

As the selling price is same for Division B and the outside customers, there would be no impact on the profits of the Division A.

The answer is - Sell the 1,000 additional circuit boards to Division B.

Division A Division B Total Company Sales 4,047,000 (190*21,300) 3,795,000 (690*5,500) 7,842,000 Expenses : Added by the division 2,406,900 (113*21,300) 1,265,000 (230*5,500) 3,671,900 Transfer price paid 1,045,000 (190*5,500) 1,045,000 Total expenses 2,406,900 2,310,000 4,716,900 Net operating Income 1,640,100 1,485,000 3,125,100

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