Answer Happy

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: $ 190 Selling price per circuit board Variable cost per Number of circuit boards: circuit board $ 126 Produced during the year Sold to outside customers Sold to Division B 20,700 14,500 6,200 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 $280 in additional variable cost per instrument and then sold the instruments for $600 each. Required: 1. Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. 2. Assume Division A's manufacturing capacity is 20,700 circuit boards. Next year, Division B wants to purchase 7,200 circuit boards from Division A rather than 6,200. (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 to sell them to outside customers?