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3. Make a note of the absorption costing net operating income (loss) in Year 2. At the end of Year 1, the company's board of
3. Make a note of the absorption costing net operating income (loss) in Year 2. At the end of Year 1, the company's board of directors set a target for Year 2 of net operating income of $110,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 4,000 units. (a) Would this change result in a bonus being paid to the CEO? Yes No (b) What is the net operating income (loss) in Year 2 under absorption costing? (Loss amounts should be indicated with a minus sign.) (c) Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,100 units per year? Yes No
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