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

Selling price				$2,250
Variable cost of goods sold
Body frame		$307
Other variable costs		908		1,215
Contribution margin				$1,035

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 $355 per frame. The variable cost for FrameBody is $265. The Cycle Division is willing to pay $285 to purchase the frames from FrameBody.Assume that FrameBody has excess capacity and is able to meet all of the Cycle Division's needs. If the Cycle Division buys 1,070 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		$

eTextbook and Media

Assume that FrameBody does not have excess capacity and therefore would lose sales if the frames were sold to the Cycle Division. If the Cycle Division buys 1,070 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 income of the Cycle Division	$
(2)	Effect on the income of FrameBody	$
(3)	Effect on income of Ayala	$

eTextbook and Media

e8.12

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