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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 30^th are as follows:

	Sales to Lawn Products Division	Sales to Outsiders
Revenue	$ 34,500	$ 92,000
Variable costs	23,000	46,000
Fixed costs	6,400	31,500
Gross margin	$ 5,100	$ 14,500
Unit sales	23,000	46,000

The Lawn Products Division has an opportunity to purchase, on a continual basis, 23,000 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?

Multiple Choice

Yes, because buying the blades would save Dana Company $8,700.

No, because making the blades would save Dana Company $10,000.

Yes, because buying the blades would save Dana Company $13,800.

No, because making the blades would save Dana Company $13,800.

No, because making the blades would save Dana Company $22,500.

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