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

question 165

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 ending inventory, the cost of goods sold would be lower, and book income would be higher.

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Definitions:

Emerging Leadership

The development of individuals who begin to exhibit leadership qualities and potential, often in the early stages of their career or within a specific context.

Interactional Leadership

A leadership style that emphasizes building effective interpersonal relationships, facilitating interactions, and valuing contributions from all members of the team.

Gender

pertains to the social, cultural, and psychological traits and behaviors that a given culture associates with an individual's biological sex.

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The manner and approach of providing direction, implementing plans, and motivating people. Leadership styles vary from authoritarian to democratic.