Under Absorption Costing, If a Manager's Bonus Is Tied to Operating

question 42

Multiple Choice

Under absorption costing, if a manager's bonus is tied to operating income, then increasing inventory levels compared to last year would result in ________.

• A) greater operating income and therefore increasing the manager's bonus
• B) less operating income and therefore decreasing the manager's bonus
• C) not affecting the manager's bonus
• D) being unable to determine the manager's bonus using only the above information

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Definitions:

Human Capital Requirements

The necessary skills, knowledge, and abilities that employees must possess to fulfill the roles and responsibilities within an organization.

Sales Levels

The amount of revenue or units sold by a company in a specific period, which can indicate the performance and market demand for its products.

Human Capital Theory

A concept in economics that emphasizes the importance of human factors, such as skills and knowledge, in contributing to economic productivity.

Financial Returns

The financial gains or profits derived from an investment or business activity, expressed as a percentage of the investment's original cost.