The Blade Division of Dana Company produces hardene Blade Division's estimated sales and cost data for the ye Revenue Variable costs Fixed costs Sales to Lawn Products Division $ 40,500 27,000 7,200 Gross margin Unit sales $ 6,300 27,000 The Lawn Products Division has an opportunity to purch additional products to outside customers. Assume, too, the blades from the outside supplier, and why? Multiple Choice No, because making the blades would save De No, because making the blades would save D- Yes, because buying the blades would save D Yes, because buying the blades would save D No, because making the blades would save Da

Principles of Cost Accounting
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Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
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The Blade Division of Dana Company produces hardened steel blades. Approximately one-third of the Blade Division's output is sold to the Lawn Products Division of Dana; the remainder is sold to outside customers.
Blade Division's estimated sales and cost data for the year ending June 30th are as follows:
Sales to Lawn
Products Division
Sales to Outsiders
Revenue
Variable costs
Fixed costs
Gross margin
Unit sales
$ 40,500
27,000
7,200
$ 6,300
27,000
$ 108,000
54,000
37,500
$ 16,500
54,000
The Lawn Products Division has an opportunity to purchase, on a continual basis, 27,000 blades (of identical quality) from an outside supplier, at a cost of $1.80 per unit. Assume that the Blade Division cannot sell any
additional products to outside customers. Assume, too, that there are no short-term avoidable fixed costs. Based solely on short-term financial considerations, should Dana allow its Lawn Products Division to purchase
the blades from the outside supplier, and why?
Multiple Choice
O
No, because making the blades would save Dana Company $36,900.
No, because making the blades would save Dana Company $16,200.
Yes, because buying the blades would save Dana Company $15,300.
Yes, because buying the blades would save Dana Company $21,600.
No, because making the blades would save Dana Company $21,600.
Transcribed Image Text:The Blade Division of Dana Company produces hardened steel blades. Approximately one-third of the Blade Division's output is sold to the Lawn Products Division of Dana; the remainder is sold to outside customers. Blade Division's estimated sales and cost data for the year ending June 30th are as follows: Sales to Lawn Products Division Sales to Outsiders Revenue Variable costs Fixed costs Gross margin Unit sales $ 40,500 27,000 7,200 $ 6,300 27,000 $ 108,000 54,000 37,500 $ 16,500 54,000 The Lawn Products Division has an opportunity to purchase, on a continual basis, 27,000 blades (of identical quality) from an outside supplier, at a cost of $1.80 per unit. Assume that the Blade Division cannot sell any additional products to outside customers. Assume, too, that there are no short-term avoidable fixed costs. Based solely on short-term financial considerations, should Dana allow its Lawn Products Division to purchase the blades from the outside supplier, and why? Multiple Choice O No, because making the blades would save Dana Company $36,900. No, because making the blades would save Dana Company $16,200. Yes, because buying the blades would save Dana Company $15,300. Yes, because buying the blades would save Dana Company $21,600. No, because making the blades would save Dana Company $21,600.
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