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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