(e) The net operating income (loss) under absorption costing is less than the net operating income (loss)...
Question:
(e) | The net operating income (loss) under absorption costing is less than the net operating income (loss) under variable costing in Year 2 because (Select all that apply.): |
3. | |
Make a note of the absorption costing net operating income (loss) in Year 2. |
At the end of Year 1, the company’s board of directors set a target for Year 2 of net operating income of $160,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 4,600 units. |
(a) | Would this change result in a bonus being paid to the CEO? | ||||
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(b) | What is the net operating income (loss) in Year 2 under absorption costing? |
(c) | Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,100 units per year? | ||||
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Intermediate Accounting
ISBN: 978-0324659139
11th edition
Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones