Under absorption 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

Question

Quizplus · Accepted Answer

Under absorption costing, increasing inventory levels would result in higher production costs being absorbed into inventory, which would decrease cost of goods sold and increase operating income. Therefore, the manager's bonus would also increase.

Under Absorption Costing,if a Manager's Bonus Is Tied to Operating