Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 8, Problem 8.12E
The Cycle Division of Ayala Company has the following per unit data related to its most recent cycle called Roadbuster.
| Selling price | $2,200 | |
| Variable cost of goods sold | ||
| Body frame | $300 | |
| Other variable costs | 900 | 1,200 |
| Contribution margin | $1,000 |
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 $350 per frame. The variable cost for FrameBody is $270. The Cycle Division is willing to pay $280 to purchase the frames from FrameBody.
Instructions
(a) Assume that FrameBody has excess capacity and is able to meet all of the Cycle Division’s needs. If the Cycle Division buys 1,000 frames from FrameBody, determine the following: (1) effect on the income of the Cycle Division; (2) effect on the income of FrameBody: and (3) effect on the income of Ayala.
(b) 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: (1) effect on the income of the Cycle Division; (2) effect on the income of FrameBody; and (3) effect on the income of Ayala.
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The Cycle Division of Culver Company has the following unit data related to its most recent cycle, the Roadster. Presently, the Cycle Division buys its body frames from an outside supplier. However Culver 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 Roadster cycle. Presently, FrameBody sells its frames for $406 per frame. The variable cost for FrameBody is $306. The Cycle Division is willing to pay $314 to purchase the frames from FrameBody.
(b) 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 1,160 frames from FrameBody, determine the following:
(1) Effect on the income of the Cycle Division
(2) Effect on the income of FrameBody
(3) Effect on the income of Culver
The Cycle Division of Sheffield Company has the following unit data related to its most recent cycle, the Roadbuster.
Selling price
Variable cost of goods sold
Body frame
Other variable costs
Contribution margin
(a)
Your answer is correct.
(b)
$330
990
Presently, the Cycle Division buys its body frames from an outside supplier. However Sheffield 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 $385 per frame. The variable cost for
FrameBody is $291. The Cycle Division is willing to pay $299 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 1,100 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).)
(2)…
The Cycle Division of Sheffield Company has the following unit data related to its most recent cycle, the Roadbuster.
Selling price
Variable cost of goods sold
Body frame
Other variable costs
Contribution margin
$330
(a)
990
$2,420
Presently, the Cycle Division buys its body frames from an outside supplier. However Sheffield 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 $385 per frame. The variable cost for FrameBody is $291. The Cycle
Division is willing to pay $299 to purchase the frames from FrameBody.
1,320
(2) Effect on the income of FrameBody
$1,100
Assume that FrameBody has excess capacity and is able to meet all of the Cycle Division's needs. If the Cycle Division buys
1,100 frames from FrameBody, determine the following: (Enter negative amounts using either a negative sign preceding
the number e.g. -45 or…
Chapter 8 Solutions
Managerial Accounting: Tools for Business Decision Making
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