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	$	178
Variable cost per circuit board	$	114
Number of circuit boards:
Produced during the year		21,100
Sold to outside customers		15,300
Sold to Division B		5,800

  
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 $210 in additional variable cost per instrument and then sold the instruments for $600 each.

Answer 1

Particulars	Units	Division -A	Units	Division -B
Sales
i. To outside customers	15,300	2,723,400.00	5,800	3,480,000.00
i. To Division-B	5,800	1,032,400.00	-	-
TOTAL SALES		3,755,800.00		3,480,000.00
Less : Variable Costs
i. Variable Cost per unit	21,100	2,405,400.00	5,800	1,032,400.00
ii. Additional Costs	-	-	5,800	1,218,000.00
TOTAL CONTRIBUTION		1,350,400.00		1,229,600.00

TOTAL SALES AND COSTS OF COMPANY AS AN WHOLE
Pariculars	Division-A	Division-B	TOTAL
Sales Total	3,755,800.00	3,480,000.00	7,235,800.00
Variable Costs Gross Total	2,405,400.00	2,250,400.00
Less : Sales of Division-A		1,032,400.00
NET Variable Costs	2,405,400.00	1,218,000.00	3,623,400.00
Profit	1,350,400.00	2,262,000.00	3,612,400.00

As per the data given there is no clarity regarding what should be answered, i assumed that the company decided to sell all the units in which the company receives highest profits, so i prepared an contribution statement for both the options.

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