Gold Leaf Computers Sources the Components for Its Laptops from Various

question 25

Multiple Choice

Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should

• A) continue to outsource production.
• B) vertically integrate.
• C) exit the laptop industry.
• D) diversify its activities.

Learn how inflation affects real returns on investments.

Understand the calculation of holding-period returns and its relevance.

Conceptualize the impact of volatility and standard deviation on investment returns.

Recognize the theoretical underpinnings and practical applications of the Capital Asset Pricing Model (CAPM) and the Security Market Line (SML).

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Definitions:

Variable Costs

Costs that vary in direct proportion to changes in the level of production or sales activity.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes towards covering fixed costs and generating profit.

Machine Hours

A measure of production time, calculated as the total hours that machinery is operated over a specific period.

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted, indicating the contribution of sales to covering fixed expenses.