1) An increase in inventory will result in _____ net operating income when using absorption costing as opposed to variable costing.

	A.	higher
	B.	equal
	C.	lower

2)

A manufacturing company uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs:

Costs:
Wages and salaries	$400,000
Depreciation	40,000
Occupancy	120,000
Total	$560,000

The distribution of resource consumption across the three activity cost pools is given below:

	Activity Cost Pools
		Order
	Fabricating	Processing	Other	Total
Wages and salaries	80%	15%	5%	100%
Depreciation	70%	25%	5%	100%
Occupancy	40%	50%	10%	100%

How much cost, in total, would be allocated in the first-stage allocation to the Order Processing cost pool?

	A.	$186,667
	B.	$280,000
	C.	$130,000
	D.	$84,000