Division P of Turbo Corporation Has the Capacity for Making

question 8

Multiple Choice

Division P of Turbo 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 Turbo 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)$600,000
• B)$225,000
• C)$750,000
• D)$135,000

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