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Exercise 22-12 The Cycle Division of Ayala Company has the following per unit data related to its most recent cycle called Roadbuster. Selling price...

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Please explain the answers also and not merely write them! Thank you so much for helping!

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Exercise 22-12 The Cycle Division of Ayala Company has the following per unit data
related to its most recent cycle called Roadbuster. Selling price $2,100
Variable cost of goods sold Body frame $295 other variable costs fl 1,185
Contribution margin $915 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 $340 per frame. The variable cost for
FrameBody is $250. The Cycle Division is willing to pay $2?5 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 1,000 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 $: 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 1,000 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).) {I} Effect on income of the Cycle Division $:
{2} Effect on the income of Eremeactiy 3; S

Top Answer

1 Effect on net Income of cycle Devision (295-275)*1000                20000 Effect on net Income of Frame... View the full answer

2 comments
  • variable cost decrease hence income increase in cycle Division (295-275)*1000 =20000 . for frame body additional income because of excess capacity
    • Whitswan
    • Apr 04, 2018 at 2:21am
  • in Part 2 because of limited capacity sales to outside @ 340 is not possible hence opportunity loss
    • Whitswan
    • Apr 04, 2018 at 2:23am

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