Michael Cohen is a factory manager at Company XYZ that manufactures refrigerators. For the sake of simplicity. suppose: - Manufacturing costs for a new QR31 refrigerator consist entirely of fixed manufacturing overhead costs ( $5,000 regardless of the production level). - Michael receives a year-end bonus of 10% on the plant's net income based on the 'traditional' income statement. - A company focus group indicates initial sales for the QR31 refrigerator in the next year will be 1 unit for $1,000 Michael must decide how many units of the new refrigerator (QR31) to produce next year. Michael is considering 2 Options: - OPTION 1 - Produced 1 unit; sold 1 unit - OPTION 2-Produced 5,000 units; sold 1 unit Because Michael is not very comfortable with numbers, he consults with his personal accountant (you) about what he should choose. Option 1. Produced 1 Unit Option 2. Sold 1 unit vs. Produced 5000 Units Sold 1 units - How will each option impact the 'traditional' income statement of Company XYZ? - How will each option impact Michael's end of year bonus based on the 'traditional' income statement? - Which option would maximize Michael's wealth? Explain your answer as though you are talking to Michael, your client. Keep the grading rubric below handy