Only variable costs are relevant costs for deciding whether to make or buy | ||
Cost to buy from outside supplier | 13770 | =10200*1.35 |
Less: Variable costs of making | 10200 | |
Net difference in favor of making | 3570 | |
No; making the blades will save Axe $3,570 | ||
Option B is correct |
The Blade Division of Axe Company produces hardened steel blades. One-third of Blade's output is sold...
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 $ 16,500 $ 44,000 Variable costs 11,000 22,000 Fixed costs 3,200 7,500 Gross margin $ 2,300 $ 14,500 Unit sales 11,000 22,000...
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 $ 19,500 $ 52,000 Variable costs 13,000 26,000 Fixed costs 3,600 10,500 Gross margin $ 2,900 $ 15,500 Unit sales 13,000 26,000...
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 $ 28,500 $ 76,000 Variable costs 19,000 38,000 Fixed costs 4,800 19,500 Gross margin $ 4,700 $ 18,500 Unit sales 19,000 38,000...
The Hammer Division of Excel Company produces hardened sledge hammers. One-third of Hammer's output is sold to the Government Products Division of Excel; the remainder is sold to outside customers. Hammer's estimated operating profit for the year is: Government Products Division Sales $ 33,000 Variable costs (10,600) Fixed costs (6,000) Operating profits $ 16,400 Unit sales 10,600 Outside Customers $ 76,000 (21,200) (12,000) $ 42,800 21,200 The Government Products Division has an opportunity to purchase 10,600 hammers of the same...
The Tire Division of Traker Company produces tires for off-road sport vehicles. One-third of Tire's output is sold to an internal division of Traker; the remainder is sold to outside customers. Tire's estimated operating profit for the year is: Internal Outside Sales $ 150,000 $ 400,000 Variable costs 100,000 200,000 Fixed costs 30,000 60,000 Operating profits $ 20,000 $ 140,000 Unit sales 10,000 20,000 The internal division has an opportunity to purchase 10,000 tires of the same quality from an...