Absorption Costing of Inventories,as Required by US GAAP,has Been

question 12

Multiple Choice

Absorption costing of inventories,as required by US GAAP,has been criticized for encouraging managers to increase year-end inventories in order to boost reported profits.Which of the following techniques is the most effective at resolving this problem?

• A)Senior management control of inventory levels
• B)Adoption of just-in-time (JIT)production system
• C)Reward managers based upon the residual income approach
• D)Use variable costing to determine income for bonus purposes
• E)None of the choices are correct

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