If a division manager's compensation is based upon the division's net income, the manager may decide to meet the net income targets by increasing production when using
A)variable costing, in order to increase net income.
B)variable costing, in order to decrease net income.
C)absorption costing, in order to increase net income.
D)absorption costing, in order to decrease net income.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead is allocated to each unit produced, so increasing production spreads these costs over more units, reducing the cost per unit and increasing net income.

If a Division Manager's Compensation Is Based Upon the Division's