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Real Corporation currently manufactures drives it uses in the laptops it produces. Costs to manufacture 5,000 of these drives last year are as follows: Cost

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Real Corporation currently manufactures drives it uses in the laptops it produces. Costs to manufacture 5,000 of these drives last year are as follows: Cost per drive $12 $2 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total $7 $26 Rona Electronics has offered to provide Real with all the drives it needs for $27 per unit. If Real accepts this offer, then it will be able to use the manufacturing space currently used to make drives to produce screens, which will generate an additional $40,000 of profit each year. If Rona produces screens instead of drives, then $3 of fixed manufacturing overhead cost above could be avoided. If Real Corp needs 5,000 drives again this year, would it be financially better off making the drives or buying the drives and by how much? $15.000 better off to buy the drives $20,000 better off to buy the drives $35,000 better off to buy the drives $60,000 better off to buy the drives None of the above

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