1. Why in a company service departments costs are allocated to the operating department? What happens if such costs are not allocated? What are different methods of allocation of service department costs to operating department costs? Please provide brief answers with examples.
2. Explain the relationship between Inventories and Operating Income when production is equal to sales, production is greater than sales and production is lower than sales. Please provide examples.
3. Why Management prefers Variable Costing Method instead of Absorption Costing?