Answer:
Effect on income= 1,120,000 - 440,000= 680,000 increase
Explanation:
Giving the following information:
Sanchez Semiconductors produces 400,000 tech computer chips per month.
The variable costs to make the component are $ 1.30 per unit, and the fixed costs are $ 1,200,000 per month. The company has been approached by a foreign producer who can supply the component, within acceptable quality standards, for $ 1.10 each. If the company chooses to outsource, fixed costs can be reduced by 50%.
Make in house:
Variable cost= 400,000*1.3= 520,000
Unavoidable Fixed costs= 600,000
Total= 1,120,000
Buy= 1.1*400,000= 440,000
