Question
The Blade Division of Axe Company produces hardened steel blades.Blades' estimated operating profit for the year is:ForestryDivisionSales$15,000.24Variable costs$10,100.00Fixed costs$3,333.33Operating profits.$1,566.91Unit sales per unit10,000A contract company
The Blade Division of Axe Company produces hardened steel blades.Blades' estimated operating profit for the year is:ForestryDivisionSales$15,000.24Variable costs$10,100.00Fixed costs$3,333.33Operating profits.$1,566.91Unit sales per unit10,000A contract company has offered to sell Axe Company the steel blades used in the Forestry Divisionfor $1.25 per unit.$2,742.11 of the fixed cost for that division can be saved by contracting outthe steel blades.a. What will be the price difference between continuing to make the steel blades and buying the steel blades?And should the company continue to make the steel blades or buy the steel blades?b. What quantity of blades will result in no difference in profit being realized whetherthe blades are continued to be made or are bought from the contract company?
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