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: Revenue Variable costs Fixed costs Gross margin Unit sales. Sales to Lawn Products Division $ 25,500 17,000 4,400 $ 4,100 17,000 Sales to Outsiders $ 68,000 34,000 16,500 $ 17,500 34,000 The Lawn Products Division has an opportunity to purchase, on a continual basis, 17,000 blades (of identical quality) from an outside supplier, at a cost of $1.60 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?

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: Revenue Variable costs Fixed costs Gross margin Unit sales. Sales to Lawn Products Division $ 25,500 17,000 4,400 $ 4,100 17,000 Sales to Outsiders $ 68,000 34,000 16,500 $ 17,500 34,000 The Lawn Products Division has an opportunity to purchase, on a continual basis, 17,000 blades (of identical quality) from an outside supplier, at a cost of $1.60 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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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