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

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 $$250$ in additional variable

cost per instrument and then sold the instruments for $$640$ each.

Required:

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

Assume Division A$\text{'}$s manufacturing capacity is $21,100$ circuit boards. Next year, Division B wants to purchase $6,600$ circuit

boards from Division A rather than $5,600.($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?

Complete this question by entering your answers in the tabs below.

Required $2$

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

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