Multiple Select QuestionSelect all that applyIf management incentives are tied to income under absorption costing, which of the following may occur (select all that apply):Multiple select question.increased financing costspossible obsolescencedecrease in storage costsdecrease in incentivesincreased storage costs.
Question
Multiple Select QuestionSelect all that applyIf management incentives are tied to income under absorption costing, which of the following may occur (select all that apply):Multiple select question.increased financing costspossible obsolescencedecrease in storage costsdecrease in incentivesincreased storage costs.
Solution
The possible outcomes when management incentives are tied to income under absorption costing could be:
-
Increased financing costs: This could occur as a result of holding more inventory, which requires more capital and hence, more financing.
-
Possible obsolescence: If more inventory is produced to absorb fixed overheads, there's a risk that some of these goods may become obsolete, especially in industries where products are frequently updated or replaced.
-
Increased storage costs: Producing more goods to absorb fixed overheads means more inventory to store, which can increase storage costs.
The options "decrease in storage costs" and "decrease in incentives" are not likely outcomes in this scenario.
Similar Questions
Multiple Choice QuestionIf management incentives are tied to income under absorption costing, which of the following may occur:Multiple choice question.decrease in incentivespossible inventory obsolescencedecrease in storage costs
Multiple Select QuestionSelect all that applyWhen making decisions, managers should consider all relevant benefits and relevant costs, which include: (Check all that apply.)Multiple select question.historical costs.incremental costs.opportunity costs.sunk costs.out-of-pocket costs.
Multiple Select QuestionSelect all that applyWhich of the following are budgets used by a service company:Multiple select question.Direct laborSalesDirect materialsCapital expendituresProductionCash
Multiple Select QuestionSelect all that applyTaxes can affect which of the following areas of investing?Multiple select question.administrative costdividendsinterestfeesrental income
Multiple Select QuestionSelect all that applyThe expenditures that firms incur in acquiring economic resources flow to households in the form of Blank______.Multiple select question.servicesprofitcostsrentinterestwages
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.