Lightning Semiconductors Produces 200,000 Hi-Tech Computer Chips Per Month

question 82

Multiple Choice

Lightning Semiconductors produces 200,000 hi-tech computer chips per month.Each chip uses a component that Lightning makes in-house.The variable costs to make the component are $1.20 per unit,and the fixed costs are $1,300,000 per month.The company has been approached by a foreign producer who can supply the component,within acceptable quality standards,for $1.10 each.The fixed costs are unavoidable,and Lightning would have no other use for the facilities currently employed in making the component.What would be the effect on operating income if the company decides to outsource?

• A)There would be no effect on operating income.
• B)Lightning Semiconductors could save $1,300,000 per month in costs.
• C)Lightning Semiconductors could save $20,000 per month in costs.
• D)Lightning Semiconductor's costs would increase by $220,000 per month.

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Definitions:

Disadvantage

A disadvantage is a condition or situation that puts someone or something at a less favorable position compared to others.

High Self-monitors

Individuals who are highly aware of their own behavior and the social context, adjusting their actions and presentation to suit different situations.

Low Self-monitors

refers to individuals who consistently exhibit their true thoughts, feelings, and behaviors regardless of the social context, displaying less adaptation to social cues.

External Locus

Refers to a belief that outcomes in one's life are due to external forces and circumstances beyond individual control.