Requirement 1. Show numerically how operating income would improve by $160,000 just by classifying the preceding costs as product costs instead of period expenses. Begin by determining the formula to compute how the controller was able to improve operating income, then enter the appropriate amounts and compute the increase in operating income. Warehousing costs as period costs - Warehousing costs as product costs = Increase in operating income 3630000 3135000 495000 Requirement 2. Is Hickey correct in his justification that these costs "are definitely related to our product"? The controller correct in his justification with respect to classifying costs as product or period costs; this determination is made by related to warehousing and distribution of goods, should be classified as and be Requirement 3. By how much will Hickey profit personally if the controller makes the adjustments in requirement 1? . Research and development, as well as all costs Jason Hickey will profit personally by if the controller makes the adjustments. Requirement 4. What should the plant controller do? The controller reclassify costs as manufacturing and to properly reflect on the so the plant manager can reap short-term benefits. The idea of correctly classifying costs is to properly reflect on the those costs that will provide a future benefit. those costs that are directly related to