C 1. Lesley Chomski is the supervisor of the New Product Division of MCO Corporation.

Her annual bonus is based on the success of new products and is computed on the number of sales that exceed each new product’s projected breakeven point. In reviewing the computations supporting her most recent bonus, Chomski found that although an order for 7,500 units of a new product called R56 had been refused by a customer and returned to the company, the order had been included in the bonus calculations. She later discovered that the company’s accountant had labeled the return an overhead expense and had charged the entire cost of the returned order to the plantwide Overhead account. The result was that product R56 appeared to exceed breakeven by more than 5,000 units and Chomski’s bonus from this product amounted to over $1,000. What actions should Chomski take? Be prepared to discuss your response in class.

Cost Behavior and Contribution Margin