The Blade Division of Axe Company Produces Hardened Steel Blades

Multiple Choice

The Blade Division of Axe Company produces hardened steel blades.One-third of Blade's output is sold to the Forestry Products Division of Axe; the remainder is sold to outside customers.Blades' estimated operating profit for the year is: The Forestry Division has an opportunity to purchase 10,000 blades of the same quality from an outside supplier on a continuing basis.The Blade Division cannot sell any additional products to outside customers.Should the Axe Company allow its Forestry Division to purchase the blades from the outside supplier at $1.25 per unit?

A) No; making the blades will save Axe $1,500.
B) Yes; buying the blades will save Axe $1,500.
C) No; making the blades will save Axe $2,500.
D) Yes; buying the blades will save Axe $2,500.