The Blade Division of Dana Company produces hardened steel blades. One third of the Blade Division's output is sold to the Lawn Products Division of Dana; the remainder is sold to outside customers. The Blade Division's estimated sales and stan¬dard cost data for the year follow

The Lawn Products Division has an opportunity to purchase 10,000 identical quality blades from an outside supplier at a cost of $1.25 per unit on a continuing basis. Assume that the Blade Division cannot sell any additional products to outside customers, that the fixed costs cannot be reduced, and that no alternative use of facilities is available.
Required:
Should Dana allow its Lawn Products Division to purchase the blades from the outside supplier? Support your answer by computing the increase or decrease in Dana Company operating costs.

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Lawn Products Outsiders $ 15,000 40,000 (10,000) (20,000) (3,000) (6,000) 14000 20,000 Sales $ 2,000 10,000 Gross profit