The Microchip Division of Silicon Computers Produces Computer Chips That

question 105

Essay

The Microchip Division of Silicon Computers produces computer chips that are sold to the Personal Computer Division and to outsiders. Operating data for the Microchip Division for 20X5 are as follows:

The Personal Computer Division has just received an offer from an outside supplier to furnish chips at $8.90 each. The manager of Microchip Division is not willing to meet the $8.90 price. She argues that it costs her $9.00 to produce and sell each chip. Sales to outside customers are at a maximum of 200,000 chips.
Required:
a.Verify the Microchip Division's $9.00 unit cost figure.
b.Should the Microchip Division meet the outside price of $8.90? Explain.
c.Could the $8.60 price be met and still show a profit for the Microchip Division sales to the Personal Computer Division? Show computations.

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Definitions:

Import

Goods or services brought into one country from another for sale.

Exchange Rate

The price of one country's currency in terms of another country's currency, affecting imports, exports, and international investment.

Dollar-Yen

Refers to the currency exchange rate between the U.S. dollar and the Japanese yen, indicating how many yen can be exchanged for one dollar.

Exported

Items or services exported from one country to another for commercial purposes.