Lightning Semiconductors produces300,000 hi-tech computer chips per month. Each chip uses a component that Lightning makesin-house. The variable costs to make the component are$1.30 perunit, and the fixed costs are$1,200,000 per month. The company has been approached by a foreign producer who can supply thecomponent, within acceptable qualitystandards, for$1.00 each. The fixed costs areunavoidable, 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 tooutsource?

A. LightningSemiconductor's costs would increase by$300,000 per month.

B. Lightning Semiconductors could save$1,200,000 per month in costs.

C. There would be no effect on operating income.

D. Lightning Semiconductors could save$90,000 per month in costs.