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The Chapter $6$ Form worksheet shown below recreates a portion of Review Problem in the text.

Change all of the numbers in the data area of your worksheet so that it looks like this:

If your formulas are correct, you should get the correct answers to the following questions.

$($a$)$ What is the net operating income $($loss$)$ in Year $1$ under absorption costing?

$($b$)$ What is the net operating income $($loss$)$ in Year $2$ under absorption costing?

$($c$)$ What is the net operating income $($loss$)$ in Year $1$ under variable costing?

$($d$)$ What is the net operating income $($loss$)$ in Year $2$ under variable costing?

$3.$

Make a note of the absorption costing net

At the end of year $1,$ the company's board of directors set a target for year $2$ net operating income $$100,000$ under absorption costing. If this target is met, a large bonus would be paid to CEO of the company. Keeping everything else the same from part $(2)$ above, change the units produced in Year $2$ to $5,000$ units.

$($a$)$ Would this change result in a bonus being to the CEO? Yes$/$No

$($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 $2,900$ units per year? Yes$/$No