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:

\begin{array} { | l | r | r | } \hline & \text { Internal Sales } & \text { External Sales } \\\hline \text { Sales: } & & \\\hline 300,000 \text { chips at } \$ 10 & \$ 3,000,000 & \\\hline 200,000 \text { chips at } \$ 12 & & \$ 2,400,000 \\\hline \text { Variable expenses at } \$ 4 & 1,200,000 & \underline { 800,000 } \\\hline \text { Contribution margin } & \$ 1,800,000 & \$ 1,600,000 \\\hline \text { Fixed cost (allocated in units) } & 1,500,000 & 1,000,000 \\\hline \text { Operating income } & \$ 300,000 & \$ 600,000 \\\hline\end{array}

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.

A Perfectly Competitive Market Exists When ________

Multiple Choice

Correct Answer:VerifiedUnlock this answer nowGet Access to more Verified Answers free of chargeAccess For Free

Correct Answer:
Verified
Unlock this answer now
Get Access to more Verified Answers free of charge