Answer:
$295,000
Step-by-step explanation:
Calculation to determine what the change in annual net operating income for the company as a whole, compared to what it is currently, would be:
Price paid by Division Q for 33,500 wheel sets: $4,187,500
(33,500*$125 per)
Less: Cost for Division P to produce 33,500 wheel sets × $93 per wheel set ($3,115,500)
Less: Lost profit for Division P to cut back sales to the outside ($777,000)
[($135 per wheel set − $93 per wheel set) × ( 78,500 wheel-63,500-33,500=18,500wheel sets):
Change in net annual operating income for the company as a whole $295,000
($4,187,500-$3,115,500-$777,000)
Therefore the change in annual net operating income for the company as a whole, compared to what it is currently, would be:$295,000