Answer the Following Question(s)using the Information Below

question 113

Multiple Choice

Answer the following question(s) using the information below.Heinrich Corporation budgeted fixed manufacturing costs of $6,000 during 2012.Other information for 2012 includes:
The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level.Manufacturing variances are closed to cost of goods sold.
-Which of the following is a weakness particular to the absorption costing method?

• A)A production manager cannot manipulate operating income.
• B)A manager is always encouraged to match the production schedule to estimated demand.
• C)A manager may be encouraged to switch production to difficult to manufacture products.
• D)A downward demand spiral can be created.
• E)A manager may be encouraged to defer maintenance.

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Definitions:

Unenforceable

A term describing a contract or clause that cannot be legally upheld or compelled by a court.

Unlicensed Contractor

An individual or company that performs trade or service work without the necessary legal authorization or permits.

Enforceable

Describes a legal agreement or contract that can be upheld or compelled by law or by a court.

Covenant Not To Compete

A contractual promise to refrain from competing with another party for a certain period of time and within a certain geographic area. Although covenants not to compete restrain trade, they are commonly found in partnership agreements, business sale agreements, and employment contracts. If they are ancillary to such agreements, covenants not to compete will normally be enforced by the courts unless the time period or geographic area is deemed unreasonable.