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.

Question

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.

Quizplus · Accepted Answer

The Answer of 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.

Calculate and Compare the Difference in Overall Corporate Net Income