10 14 Smoothit Inc is facing a problem with their Their net operating income gnt s hir 4th qarter absorption costing net operating income on December 25. absorption c arget is $1,900,000 and the data so far is as follows: Sales Revenue $12,000,000 ($600/unit) S5.000,000 ($250/unit) $3,375.000 $2,000,000 Variable COGs Fixed manufacturing overhead Fixed S&A Variable S&A: Commission on Sales Smooth the year and all the units last week of December to meet the net operating income target 5% a policy of having zero inventories at the end of each quarter. No further sales are possible during produced so far have been sold. The CEO is planning to produce items for inventory in the it has had ow many units (nearest whole number) need to be produced for inventory to meet the net operating income target if the sales commission is left unchanged? A. B. C. D. E. None of the above 2.734 units 5.185 units 7,000 units 20,000 units 15 Assuming production levels and cost structure are stable from period to period,if inventories increass during the period, which of the following statements is trus? A. Net operating income under absorption costing is the same as under variable costing. B. Net operating income is lower under absorption costing than under variable costing. because some of the fixed manufacturing overhead of the period is deferred in inventories under absorption costing. Net operating income is lower under absorption costing than under variable costing, because some of the fixed manufacturing overhead of the previous periods is releassd from inventories under absorption costing C. D. Net operating income is highsr under absorption costing E. Net operating income is highst under absorption costing than under variable costing, because some of the fixed manufacturing overhead of the previous periods is rslsasd from inventories under absorption costing manufacturing overhead of the period is deferrsd in inventories under absorption costing