Calculate and Compare the Difference in Overall Corporate Net Income

Calculate and compare the difference in overall corporate net income 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) None of the above is correct.

Correct Answer:

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