What is the differential cost of selling

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Question - Blade Division of ABC Co. produces hardened steel blades. One-third of the Blades 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 standard costs data for the fiscal year ending June 30 are as follows:

 

Lawn Products

Outsiders

Sales

P15,000

P40,000

Variable costs

(10,000)

(20,000)

Fixed costs

(3,000)

(6,000)

Gross margin

P2,000

P14,000

Unit sales

10,000

20,000

Lawn Products can buy the blades from an outside supplier at P1.50 each. Assume the Blade Division is now at capacity and sufficient demand exists to sell all production to outsiders at present prices, what is the differential cost (benefit) of selling the all blades to external customers?

Reference no: EM132984491

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