If a Company Uses Standard Absorption Costing, How Could a Business

question 138

Multiple Choice

If a company uses standard absorption costing, how could a business manager exploit that accounting method in order to boost book income without violating the rules of GAAP?

• A) By adopting just-in-time inventory management, the manager could reduce the costs of financing and storing inventory, which would in turn, help boost book income.
• B) By coding administrative costs to inventory, the manager could report lower total expenses and thus report higher income.
• C) By reducing inventory levels, the manager could show higher sales revenues, and thus report higher book income.
• D) By building up inventory levels, fixed manufacturing costs could be "stored up" in inventory, the cost of goods sold would be lower, and book income would be higher.

Understand different modes of entering foreign markets.

Recognize the concept of the liability of foreignness and its impact on companies entering new markets.

Identify the factors influencing a company's choice of foreign market entry mode.

Differentiate between equity and nonequity modes of market entry.