The Micro Division of Silicon Computers Produces Computer Chips That

question 96

Essay

The Micro Division of Silicon Computers produces computer chips that are sold to the Personal Computer Division and to outsiders. Operating data for the Micro Division for 20X5 are as follows:
The Personal Computer Division has just received an offer from an outside supplier to furnish chips at $8.60 each. The manager of Micro Division is not willing to meet the $8.60 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 Micro Division's $9.00 unit cost figure.
b. Should the Micro Division meet the outside price of $8.60? Explain.
c. Could the $8.60 price be met and still show a profit for the Micro Division sales to the Personal Computer Division? Show computations.

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Definitions:

Implicit Marginal Tax Rates

The effective rate of taxation on an individual’s additional income from work or other sources, taking into account the loss of benefits or tax deductions as income increases.

Income Transfer Programs

Government initiatives designed to redistribute money from certain groups of individuals to others, typically from the wealthier segments of society to those in need, to reduce economic inequality.

Able-bodied Poor

Individuals who are physically capable of working but are living in poverty due to unemployment, underemployment, or low wages.

Implicit Marginal Tax Rates

The effective rate at which additional income is taxed, considering both explicit taxes and the phase-out of benefits or allowances.