TIF 7-1 Absorption costing operating income The Southern Division manager of Texcaliber Inc. is growing concerned that the division will not be able to meet its current period income objectives. The division uses absorption costing for internal profit reporting and had an appropriate level of inventory at the beginning of the period. The division manager knows that he can boost profits by increasing production at the end of the period. The increased production will allocate fixed costs over a greater number of units, reducing cost of goods sold and increasing earnings. Unfortunately, it is unlikely that addi- tional production will be sold, resulting in a large ending inventory balance. The division manager has come to Aston Melon, the divisional controller, to determine exactly how much additional production is needed to increase net income enough to meet the division's profit objectives. Aston analyzes the data and determines that the division will need to incr inventory by 30% in order to absorb enough fixed costs to meet the division's income objective. Aston reports this information to the division manager. Is Aston acting ethically?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The Southern Division manager of Texcaliber Inc. is growing concerned that the division will
The division manager has come to Aston Melon, the divisional controller, to determine exactly
for internal profit reporting and had an appropriate level of inventory at the beginning of the
period. The division manager knows that he can boost profits by increasing production at the
end of the period. The increased production will allocate fixed costs over a greater number of
units, reducing cost of goods sold and increasing earnings. Unfortunately, it is unlikely that addi-
profit objectives. Aston analyzes the data and determines that the division will need to increase
inventory by 30% in order to absorb enough fixed costs to meet the division's income objective.
how much additional production is needed to increase net income enough to meet the division's
Chapter 7
Variable Costing for Management Analysis
ke It Further
TIF 7-3 Salesper
Bon Jager Inc. ma
TIF 7-1 Absorption costing operating income
team consists of
COMMUNICATION
was prepared a
ETHICS
not be able to meet its current period income objectives. The division uses absorption will
Sales......
tional production will be sold, resulting in a large ending inventory balance.
Variable c
Manufac
how much additional production is needed to increase net income enough to meet the divisio
Variable
Varia
Var
Aston reports this information to the division manager.
Cor
Is Aston acting ethically?
Ma
TIC 1O
oting
Transcribed Image Text:The Southern Division manager of Texcaliber Inc. is growing concerned that the division will The division manager has come to Aston Melon, the divisional controller, to determine exactly for internal profit reporting and had an appropriate level of inventory at the beginning of the period. The division manager knows that he can boost profits by increasing production at the end of the period. The increased production will allocate fixed costs over a greater number of units, reducing cost of goods sold and increasing earnings. Unfortunately, it is unlikely that addi- profit objectives. Aston analyzes the data and determines that the division will need to increase inventory by 30% in order to absorb enough fixed costs to meet the division's income objective. how much additional production is needed to increase net income enough to meet the division's Chapter 7 Variable Costing for Management Analysis ke It Further TIF 7-3 Salesper Bon Jager Inc. ma TIF 7-1 Absorption costing operating income team consists of COMMUNICATION was prepared a ETHICS not be able to meet its current period income objectives. The division uses absorption will Sales...... tional production will be sold, resulting in a large ending inventory balance. Variable c Manufac how much additional production is needed to increase net income enough to meet the divisio Variable Varia Var Aston reports this information to the division manager. Cor Is Aston acting ethically? Ma TIC 1O oting
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