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

question 205

Multiple Choice

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

• A) increasing the manager's bonus
• B) 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:

Demand

The total quantity of a good or service that consumers are willing and able to purchase at various prices.

Chipotle

An international chain of fast-casual restaurants specializing in tacos and Mission-style burritos.

Inferior Good

Goods whose demand declines as consumer income rises, distinct from normal goods where demand increases with higher income.

Buyers' Incomes

The total earnings of consumers which influence their purchasing power and demand in the marketplace.