Calculate and Compare the Difference in Overall Corporate Net Income

question 31

Multiple Choice

Calculate and compare the difference in overall corporate net income of Branded Shoe Company between Scenario A and Scenario B if the Assembly Division sells 100,000 pairs of shoes for $120 per pair to customers.
Scenario A: Negotiated transfer price of $30 per pair of soles
Scenario B: Market-based transfer price

• A) $1,000,000 more net income under Scenario A
• B) $1,000,000 of net income using Scenario B
• C) $200,000 of net income using Scenario A.
• D) The net income would be the same under both scenarios.

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