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  3. division a manufactures electronic circuit boards

Division A manufactures electronic circuit boards that can be sold to Division B of the...

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Accounting

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 $270 in additional variable cost per
instrument and then sold the instruments for $670 each.
Required:
Calculate the net operating incomes earned by Division A, Division B, and the company
as a whole.
Assume Division A's manufacturing capacity is 21,500 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 1,000 additional circuit boards to Division B or
continue selling them to outside customers?
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