Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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:

Lawn Products Division

Outsiders

Sales

$15,000

$40,000

Variable costs

10,000

20,000

Fixed costs

3,000

6,000

Gross margin

$2,000

$14,000

Unit sales

10,000

20,000

The Lawn Products Division has an opportunity to purchase on a continual basis 10,000 blades (of identical quality) from an outside supplier, at a cost of $1.25 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?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing And Systems Exam Questions And Explanations

Authors: Irvin N. Gleim

10th Edition

158194246X, 978-1581942460

More Books

Students also viewed these Accounting questions

Question

=+ (b) Generalize Markov's inequality: PXaE[X] with probability 1.

Answered: 1 week ago

Question

3. List ways to manage relationship dynamics

Answered: 1 week ago