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Zouar Computer Corporation Currently Manufactures the Disk Drives That It

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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: 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 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?

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Definitions:

Banking Relationship

Refers to the business interactions and communications between a bank and its customers, including the services and products offered.

Immediate Decrease

A sudden decrease in value or amount, happening without delay or within a very short time frame.

Ledger Balance

The total balance of all accounts in a business's ledger, reflecting the current financial situation before any adjustments or reconciliations.

Smart Card

Much like an automated teller machine card; one use is within corporations to control access to information by employees.

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