The day after the statement was verified, the president took his check for $1,400,000 and resigned
to take a job with another corporation. He remarked, “I enjoy challenges. Now that Brassinni Company
is in the black, I’d prefer tackling another challenging situation.” (His contract with his new employer is
similar to the one he had with Brassinni Company.)
Required
a. Step back, and look at this overal situation. In general, what do you think is going on here? More
specifically, how would you evaluate the company’s year 2 performance?
b. Using variable costing, what would operating profit be for year 1? For year 2? (Assume that all
selling and administrative costs are committed and unchanged.) Compare those results with the
absorption-costing statements.
Comment on any ethical issues you see in this scenario.