# (e) The net operating income (loss) under absorption costing is less than the net operating income...

###### Question:

 (e) The net operating income (loss) under absorption costing is less than the net operating income (loss) under variable costing in Year 2 because (Select all that apply.):

 3. Make a note of the absorption costing net operating income (loss) in Year 2.

 At the end of Year 1, the company’s board of directors set a target for Year 2 of net operating income of $70,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 3,600 units. (a) Would this change result in a bonus being paid to the CEO?  Yes No  (b) What is the net operating income (loss) in Year 2 under absorption costing? (c) Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,100 units per year?  Yes No Chapter 6: Applying Excel 2 3 Data 4 Selling price per unit 5 Manufacturing costs 6 Variable per unit produced 7 Direct materials 8Direct labor 9Variable manufacturing overhead 10 Fixed manufacturing overhead per year 11 Selling and administrative expenses: 12 Variable per unit sold 13 Fixed per year$331 $150$56 $33$93,600 $4$52,000 Year 1 Year 2 16 Units in beginning inventory 17 Units produced during the year 18 Units sold during the year 19 2,600 2,100 1,800 2,100

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