Question
The Wheel Division of Frankov Corporation has the capacity for making 75,000 wheel sets per year and regularly sells 60,000 each year on the outside
The Wheel Division of Frankov 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. The Retail Division of Frankov Corporation currently buys 30,000 wheel sets (of the kind made by the Wheel Division) yearly from an outside supplier at a price of $90 per wheel set. If the Retail Division were to buy the 30,000 wheel sets it needs annually from the Wheel Division 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:
$135,000.
$750,000.
$225,000.
$600,000.
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