Exercise 8-12 (Part Level Submission)

The Cycle Division of Ayala Company has the following per unit data related to its most recent cycle called Roadbuster.

Selling price				$2,190
Variable cost of goods sold
Body frame		$302
Other variable costs		893		1,195
Contribution margin				$995

Presently, the Cycle Division buys its body frames from an outside supplier. However Ayala has another division, FrameBody, that makes body frames for other cycle companies. The Cycle Division believes that FrameBody's product is suitable for its new Roadbuster cycle. Presently, FrameBody sells its frames for $359 per frame. The variable cost for FrameBody is $266. The Cycle Division is willing to pay $287 to purchase the frames from FrameBody.

(a)

Assume that FrameBody has excess capacity and is able to meet all of the Cycle Division's needs. If the Cycle Division buys 1,110 frames from FrameBody, determine the following: (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

(1)	Effect on the income of the Cycle Division		$
(2)	Effect on the income of FrameBody		$
(3)	Effect on the income of Ayala		$

By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor.