Division A manufactures electronic circuit boards. The boards can be sold either
ID: 2428396 • Letter: D
Question
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 Selling Price per circuit board $126 Production cost per circuit board $90 Number of circuit boards: Produced during the year 20.000 Sold to outside customers 16.000 Sold to Division B 4.000 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 manufacturing by that division (one circuit board per instrument) Division B incurred $100 in additional cost per instrument and then sold the instruments for $300 each Assume that Division A's manufacturing capacity is 20.000 circuit boards, and demand from outside customers will remain at 16,000 units Next year, Division B wants to purchase 5,000 circuit boards from Division A rather than 4,000 Circuit boards of this type are not available from other sources If Division A decides to sell the extra 1,000 units to Division B. what impact if any will the decision have on the overall company's profits'? $ Increase/Decrease/No ChangeExplanation / Answer
16000
90
125
35
$560,000
15000
90
125
35
$525,000
B Division Outsiders Sold Units 400016000
Manufacturing Cost 19090
Selling price 300125
Profit per Unit 11035
Profit for total units $440,000$560,000
Total Profit for Company = $1,000,000