The Assembly Division of Hunter Valley Bicycles Company Has Offered

The Assembly Division of Hunter Valley Bicycles Company has offered to purchase 90 000 frames from the Frame Division for $170 per unit.At a normal volume of 250 000 frames per year,production costs per frame are as follows:
$$\begin{array} { | l | r| } \hline \text { Direct materials } & \$ 80 \\\hline \text { Direct manufacturing labour } & 40 \\\hline \text { Variable factory overhead } & 24 \\\hline \text { Fixed factory overhead } & \underline { 40 } \\\hline \text { Total } & \$ 184 \\\hline\end{array}$$
The Frame Division has been selling 250 000 frames per year to outside buyers at $230 each;capacity is
350 000 frames per year.The Assembly Division has been buying frames from outside sources for $225 each.
Required:
a.Should the Frame Division manager accept the offer? Explain.
b.From the company's perspective,will the internal sales be of any benefit? Explain.
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