Branded Shoe Company manufactures only one type of shoe and has two divisions, the Stitching Division and the Polishing Division. The Stitching Division manufactures shoes for the Polishing Division, which completes the shoes and sells them to retailers. The Stitching Division "sells" shoes to the Polishing Division. The market price for the Polishing Division to purchase a pair of shoes is $50. (Ignore changes in inventory.) The fixed costs for the Stitching Division are assumed to be the same over the range of 40,000-103,000 units. The fixed costs for the Polishing Division are assumed to be $22 per pair at 103,000 units. Stitching's costs per pair of shoes are: Direct materials $11 Direct labor $9 Variable overhead $7 Division fixed costs $5 Polishing's costs per completed pair of shoes are: Direct materials $20 Direct labor $7 Variable overhead $10 Division fixed costs $16 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 103,000 pairs of shoes for $120 per pair to customers. Scenario A: Negotiated transfer price of $33 per pair of shoes Scenario B: Market-based transfer price A) $103,000 less net income using Scenario A. B) $1,751,000 less net income using Scenario B C) $1,751,000 more net income under Scenario A The net income would be the same under both scenarios. 19) Soft Cushion Company is highly decentralized. Each division is empowered to make its own sales decisions. The Assembly Division can purchase stuffing, a key component, from the Production Division or from external suppliers. The Production Division has been the major supplier of stuffing in recent years. The Assembly Division has announced that two external suppliers will be used to purchase the stuffing at $40 per pound for the next year. The Production Division recently increased its unit price to $58. The manager of the Production Division presented the following information - variable cost $40 and fixed cost $8-to top management in order to attempt to force the Assembly Division to purchase the stuffing internally. The Assembly Division purchases 20,600 pounds of stuffing per month. What would be the monthly operating advantage (disadvantage) of purchasing the goods internally, assuming the external supplier increased its price to $82 per pound and the Production Division is able to utilize the facilities for other operations, resulting in a monthly cash-operating savings of $34 per pound? (A) $(164,800) B) $865,200 C) $(206,000) D) $1,689,200 19)