A>)why might plant managre buildi up finished goods inventory if they use absorption costing?what are two...

A>)why might plant managre buildi up finished goods inventory if they use absorption costing?what are two ways to redusing negative aspect of absorption costing ?explain?

B) what is expactancy theory? ho wcould it be apply in business organisations

Expert Solution

Part A

Absorption costing could result in an increase in net income if a company increases its production and its inventory. This occurs because fixed manufacturing overhead is allocated to more production units—some of which will be reported as inventory because of which plant manager build up finished goods inventory if they use absorption costing as this shall show better performance of their plant.

Two ways to reduce the negative aspect are:

Adopt the policy of inventory holding charge for managers beyond a certain level

include non financial measures as well in the managers appraisals

Extend the time period used to assess the performance of manager

Part B

Expectancy theory revolves around the idea that it is not just the monetary compensation which brings out the best from an employee. There are employees who look after the job which are challenging and improve their skill and knowledge level. This theory suggests to identify such needs of the employees and trust them with difficult tasks associated with compensation plans in form of bonus.

This can be applied in business with proper leadership, appropriate goal setting as the goal should be achievable and not demoralise the employees, proper training and delegation of authorities.

ekkarill92 answered 1 year ago

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