Division P of Launch Corporation Has the Capacity for Making

question 143

Multiple Choice

Division P of Launch Corporation has the capacity for making 75,000 wheel sets per year and regularly sells 60,000 each year on the outside market. The regular sales price is $100 per wheel set, and the variable production cost per unit is $65. Division Q of Launch Corporation currently buys 30,000 wheel sets (of the kind made by Division P) yearly from an outside supplier at a price of $90 per wheel set. If Division Q were to buy the 30,000 wheel sets it needs annually from Division P at $87 per wheel set, the change in annual net operating income for the company as a whole, compared to what it is currently, would be:

• A) $135,000
• B) $700,000
• C) $600,000
• D) $750,000
• E) $225,000

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Definitions:

Wants

Desires or needs that drive consumer behavior, often going beyond basic necessities.

Demands

Consumer desires for specific goods or services supported by the ability and willingness to pay for them.

Production Era

A period in the history of marketing thought, roughly from the early 20th century until the 1950s, where the focus was on production capabilities and efficiency rather than on meeting the needs of customers.

Consumer Demand

The desire and willingness of consumers to purchase goods and services at various price points, driving the market dynamics for those goods and services.