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 1,100 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).)
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 1,100 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).)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![The Cycle Division of Sheffield Company provides the following unit data for the Roadbuster cycle:
- **Selling Price:** $2,420
- **Variable Cost of Goods Sold:**
- Body Frame: $330
- Other Variable Costs: $990
- Total Variable Costs: $1,320
- **Contribution Margin:** $1,100
Currently, the Cycle Division purchases body frames from an outside supplier. However, Sheffield has another division, FrameBody, which manufactures body frames for other cycle companies. The Cycle Division believes FrameBody's product is suitable for the Roadbuster cycle. FrameBody sells its frames for $385 each, with a variable cost of $291. The Cycle Division is willing to pay $299 per frame.
### Part (a)
Assuming FrameBody has excess capacity and can fulfill all the Cycle Division's needs, if the Cycle Division buys 1,100 frames from FrameBody, the effects on income would be:
1. **Effect on the Income of the Cycle Division:** $34,100
2. **Effect on the Income of FrameBody:** $8,800
3. **Effect on the Income of Sheffield:** $42,900
### Part (b)
Assuming FrameBody lacks excess capacity and would lose sales if frames were sold to the Cycle Division, if the Cycle Division buys 1,100 frames, determine the effects on income:
1. **Effect on the Income of the Cycle Division:** *[input required]*
2. **Effect on the Income of FrameBody:** *[input required]*
3. **Effect on the Income of Sheffield:** *[input required]*
**Instructions:** Enter negative amounts using a negative sign (e.g., -45) or parentheses (e.g., (45)).
---
This exercise helps understand the impact of internal transfers on divisional and overall company profitability, factoring in capacity constraints.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F515c4078-d574-4da9-8644-21b4814f7a9d%2F6a3a7c36-e0dd-49a3-9188-3c16f7640c16%2Fokb64t9_processed.png&w=3840&q=75)
Transcribed Image Text:The Cycle Division of Sheffield Company provides the following unit data for the Roadbuster cycle:
- **Selling Price:** $2,420
- **Variable Cost of Goods Sold:**
- Body Frame: $330
- Other Variable Costs: $990
- Total Variable Costs: $1,320
- **Contribution Margin:** $1,100
Currently, the Cycle Division purchases body frames from an outside supplier. However, Sheffield has another division, FrameBody, which manufactures body frames for other cycle companies. The Cycle Division believes FrameBody's product is suitable for the Roadbuster cycle. FrameBody sells its frames for $385 each, with a variable cost of $291. The Cycle Division is willing to pay $299 per frame.
### Part (a)
Assuming FrameBody has excess capacity and can fulfill all the Cycle Division's needs, if the Cycle Division buys 1,100 frames from FrameBody, the effects on income would be:
1. **Effect on the Income of the Cycle Division:** $34,100
2. **Effect on the Income of FrameBody:** $8,800
3. **Effect on the Income of Sheffield:** $42,900
### Part (b)
Assuming FrameBody lacks excess capacity and would lose sales if frames were sold to the Cycle Division, if the Cycle Division buys 1,100 frames, determine the effects on income:
1. **Effect on the Income of the Cycle Division:** *[input required]*
2. **Effect on the Income of FrameBody:** *[input required]*
3. **Effect on the Income of Sheffield:** *[input required]*
**Instructions:** Enter negative amounts using a negative sign (e.g., -45) or parentheses (e.g., (45)).
---
This exercise helps understand the impact of internal transfers on divisional and overall company profitability, factoring in capacity constraints.
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