Lightning Semiconductors Produces 100,000 Hi-Tech Computer Chips Per Month

question 10

Multiple Choice

Lightning Semiconductors produces 100,000 hi-tech computer chips per month.Each chip uses a component which Lightning makes in-house.The variable costs to make the component are $1.40 per unit and the fixed costs run at $1,100,000 per month.The company has been approached by a foreign producer who can supply the component,ready-made and with acceptable quality standards for $1.20 each.The fixed costs are unavoidable and Lightning would have no other use for the facilities currently employed in making the component.What is the effect on operating profit if the company decides to outsource?

• A) Lightning Semiconductors could save $20,000 per month in costs.
• B) There would be no effect on operating profit.
• C) Lightning Semiconductors could save $1,100,000 per month in costs.
• D) Lightning Semiconductors' costs would go up by $120,000 per month.

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Definitions:

Sterile Gown

Protective attire worn by medical staff during procedures to maintain a sterile environment and prevent contamination.

Perioperative Area

The region or set of rooms in a healthcare facility used for patients undergoing surgical procedures, including pre-operatory, operatory, and post-operatory spaces.

Surgical Technologist

A healthcare professional who assists in surgical operations, ensuring that the procedure goes smoothly by preparing and organizing equipment and assisting surgeons.

Routine Practices

Standard infection control strategies in healthcare settings aimed at the prevention of infections and protecting both healthcare providers and patients.