Use the information below to answer the following question(s).Balloon Arrangements produces balloon bouquets.The following information has been provided by management:

-Which of the following criteria should be used to evaluate management according to critics of absorption costing?
A)the extent to which inventory production matches demand
B)the extent to which financial performance measures are used
C)the extent to which operating income is increased in the short run
D)the extent to which production quotas are exceeded
E)We should rely only on financial criteria to measure performance.

Question

Use the information below to answer the following question(s).Balloon Arrangements produces balloon bouquets.The following information has been provided by management:
 
-Which of the following criteria should be used to evaluate management according to critics of absorption costing?
A)the extent to which inventory production matches demand 
B)the extent to which financial performance measures are used 
C)the extent to which operating income is increased in the short run 
D)the extent to which production quotas are exceeded 
E)We should rely only on financial criteria to measure performance.

Quizplus · Accepted Answer

Critics of absorption costing argue that it can lead to overproduction and inventory buildup, which may not match demand. Evaluating management based on the extent to which inventory production matches demand would reflect this concern. Financial performance measures (B) are not specific to absorption costing and can be evaluated independently of the costing method. Increasing operating income (C) in the short run can be achieved through various methods, including those that may not align with long-term goals or may not be sustainable. Production quotas (D) may not be relevant to the concerns regarding absorption costing. Option (E) is incorrect because relying only on financial criteria may not reflect the operational and strategic aspects of the business, including the impact of absorption costing on the production decision.

Use the Information Below to Answer the Following Question(s)