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Division P of Launch Corporation has the capacity for making 76,500 wheel sets per year and regularly sells 61,500 each year on the outside market.

Division P of Launch Corporation has the capacity for making 76,500 wheel sets per year and regularly sells 61,500 each year on the outside market. The regular sales price is $115 per wheel set, and the variable production cost per unit is $77. Division Q of Launch Corporation currently buys 31,500 wheel sets (of the kind made by Division P) yearly from an outside supplier at a price of $105 per wheel set. If Division Q were to buy the 31,500 wheel sets it needs annually from Division P at $99 per wheel set, the change in annual net operating income for the company as a whole, compared to what it is currently, would be:

  • $765,000

  • $138,000

  • $255,000

  • $882,000

  • $615,000

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