Zuppa Corporation Currently Maintains Its Own Printing Department

question 56

Multiple Choice

Zuppa Corporation currently maintains its own printing department.The annual costs of running this department are as follows:
Somatic Copy Service has offered to provide Zuppa with all of its printing needs at a total annual cost of $68,000.If Zuppa went with this offer,they would close down their printing department.Except for 30% of the fixed costs,all of the annual printing department costs above can be avoided if it was closed down.Based on this information,would Zuppa be better off to keep its printing department or to shut it down and take Somatic's offer and by how much?

• A)$4,000 better off to go with Somatic
• B)$5,000 better off to keep the department
• C)$20,000 better off to keep the department
• D)$22,000 better off to go with Somatic

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Definitions:

Purchasing Power Parity

An economic theory that states that the exchange rate between two currencies is equal to the ratio of the currencies' respective purchasing power.

Relative Purchasing

The comparison of the purchasing power of various currencies against goods and services, adjusting for their price differences in different countries.

Export Development Canada

A Canadian government agency that provides financing, insurance, and other support to Canadian exporters and investors.

Federal Crown

A term referring to the sovereign power of the government in a monarchy, especially in context to its authority and jurisdiction.