Zoom Golf Carts (ZGC) currently produces its own electric motors. Electco has offered to sell the electric motors to (ZGC) at a price of $300 each.

(ZGCs) current production information for the motors follows:

Unit-level material and labor $175

Facility-level depreciation of manufacturing equip. $12,000/year

Product-level supervisor's salary $24,000/year

Annual facility-level utilities . $1,500

(ZGC) is currently operating profitably producing 2,000 engines a year. (ZGC) maintains worker loyalty by offering employees lifetime employment. Which of the following is true?

a. (ZGC) should buy the engines for cost savings of $113 per unit.

b. (ZGC) should continue producing the engines.

c. (ZGC) has relevant (avoidable) costs of greater than $300 a unit and should buy.

d. (ZGC) will save $126,000 by producing the engines.

ANSWER: The answer appears to be 'B', but why?