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Ellory Clawson, the sales manager of Long Beach Luxury Beach Furniture, is growing concerned that th division will not be able to meet its current

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Ellory Clawson, the sales manager of Long Beach Luxury Beach Furniture, is growing concerned that th division will not be able to meet its current period income objectives. Meeting the income objectives als means all managers receive a 3% bonus. The division uses absorption costing for internal profi reporting and had an appropriate level of inventory at the beginning of the period. Ellory determines that profits can be boosted by increasing production by 30% at the end of the period. The increased productio will allocate fixed costs over a greater number of units reducing cost of goods sold and increasing earnings. Unfortunately, it is unlikely the additional production will be sold during this period, resulting in a large ending inventory balance. The furniture will be sold in the next period, but the company would need to pay additional money to store the extra furniture. The production manager, Mr. Kento Au, meets month with Ellory to determine exactly how much productio is needed to meet sales projections. The meeting is th afternoon and Ellory is conflicted. If she tells Ketno to increase production by 30%, it will mean the company vill produce too many units this period and incur dditional storage costs. If she tells Kento that no dditional production is needed, they will miss their rofit projections and the managers will not receive 1. Discuss the pros and cons of both options. Include a discussion of ethics around the increased cost of storage the company will pay i more units are produced. 2. How will this impact operating income and inventory if absorption costing concepts are used? 3. What option would you choose and why

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