Zouar Computer Corporation Currently Manufactures the Disk Drives That It

question 79

Multiple Choice

Zouar Computer Corporation currently manufactures the disk drives that it uses in its computers. The costs to produce 5,000 of these disk drives last year were as follows: Kidal Electronics has offered to provide Zouar with all of its disk drive needs for $27 per drive. If Zouar accepts this offer, Zouar will be able to use the freed up space to generate an additional $40,000 of income each year to produce more of its computer keyboards. Only $3 per drive of the fixed manufacturing overhead cost above could be avoided. Direct labor is an avoidable cost in this decision. Based on this information, would Zouar be financially better off making the drives or buying the drives and by how much?

• A) $15,000 better to buy
• B) $20,000 better to buy
• C) $35,000 better to buy
• D) $60,000 better to make

---

Definitions:

Auxiliary Equipment

Equipment that supports the primary operation of a system but is not the main component, often providing additional functionality or safety.

Control Contacts

Components in electrical devices that make or break the electrical connection, often used in relays, switches, and circuit breakers to control the flow of electricity.

Manual Motor Starters

Devices designed to manually switch on and off motors while providing overload protection to prevent motor damage.

Motor Starters

Devices engineered to control the electrical current for starting and stopping motors to protect them from damage.