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The Montre Company manufactures trendy, high-quality, moderately priced watches. As Montre's senior financial analyst, you are asked to recommend a method of inventory costing. The
The Montre Company manufactures trendy, high-quality, moderately priced watches. As Montre's senior financial analyst, you are asked to recommend a method of inventory costing. The chief financial officer (CFO) will use your recommendation to prepare montre's income statement. The following data are for the year ended December 31, :
1. | Prepare income statements under variable and absorption costing for the year ended December 31, 2020. |
2. | What is Montre's operating income as percentage of revenues under each costing method? |
3. | Explain the difference in operating income between the two methods. |
4. | Which costing method would you recommend to the CFO? Why? |
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