The questions below pertain to two different scenarios involving a manufacturing company. In each scenario, the cost
Question:
Required:
1. Consider the following data for scenario A:
a. Were unit sales constant from year to year? Explain.
b. What was the relation between unit sales and unit production levels in each year? For each year, indicate whether inventories grew or shrank.
2. Consider the following data for scenario B:
a. Were unit sales constant from year to year? Explain.
b. What was the relation between unit sales and unit production levels in each year? For each year, indicate whether inventories grew or shrank.
3. Given the patterns of net operating income in scenarios A and B above, which costing method, variable costing or absorption costing, do you believe provides a better reflection of economic reality?Explain.
Step by Step Answer:
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer