Question

The Jordan Company manufacturers only one type of shoe and has two divisions, the Sole Division and the Assembly Division The Sole Division manutactures soles and then them to retaiers The market price tor te Assemby Dwson to puttase a par of scies s$40 Foedcosts are per par 100000 Soles costs per pair of soes are 58 Drect maberias Direct labor Division od cot 32 Assemblys coots per completed pi of $10 Direct labor Vanabie ovemead Division fodcon
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Answer #1

Answer : A. $1000000 more net income under Scenario A.

=>

Scen A Scen B
Sales 120 120
Less: Exp.
DM 10 10
DL 2 2
V O/h 2 2
Sole transf Price 30 40
Total Variable cost 44 54
Add:Fixed Exp. 18 18
Total Expenses 62 72
Net Income per unit 58 48
Total Net Income 5800000 4800000
Increase in NI 1000000
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