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

Solutions

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

Next > < Previous

Related Solutions

1.The finished goods beginning inventory = $100,000; The finished goods ending inventory = $50,000; The work...

1.The finished goods beginning inventory = $100,000; The finished goods ending inventory = $50,000; The work in process inventory at the beginning of the year was $150,000 and at the end of the year $50,000; The raw materials inventory at the beginning of the year $80,000 and at the end of the year was $40,000. Manufacturing costs and selling and administrative expenses were as follows: indirect materials = $10,000; factory utilities = $20,000; raw material purchases = $30,000 in June...

1. Use the following data to determine the cost of goods manufactured: Beginning finished goods inventory...

1. Use the following data to determine the cost of goods manufactured: Beginning finished goods inventory $ 12,600 Direct labor used 32,400 Beginning work in process inventory 9,000 General and administrative expenses 15,300 Direct materials used 42,300 Ending work in process inventory 10,800 Indirect labor 8,100 Ending finished goods inventory 11,300 Indirect materials 15,300 Depreciation—factory equipment 9,300 2. Current information for the Healey Company follows: Beginning raw materials inventory $ 31,200 Raw material purchases 76,000 Ending raw materials inventory 32,600...

What is the difference between absorption and variable costing and why does inventory level which is...

What is the difference between absorption and variable costing and why does inventory level which is reported on the Balance Sheet affect net income which is reported on the Income Statement? How is the accounting definition of an asset related to the decision to use absorption vs. variable costing?

Under applied over head 14,000 Finished goods inventory, beginning 310,000 Finished goods inventory, ending 380,000 Raw...

Under applied over head 14,000 Finished goods inventory, beginning 310,000 Finished goods inventory, ending 380,000 Raw materials inventory, beginning 110,000 Raw materials inventory, ending 95,000 Work in process inventory, beginning 105,000 Work in process inventory, ending 85,000 Selling expenses 180,000 Manufacturing overhead Applied 490,000 Direct labor 390,000 Administrative expenses 385,000 Purchases of raw materials 295,000 Sales 2,885,000 Required: 1) Prepare a schedule of Cost of Goods Sold for the year in good form? (Use the table given in the answer...

Luker Corporation uses a process costing system. The company had $172,500 of beginning Finished Goods Inventory...

Luker Corporation uses a process costing system. The company had $172,500 of beginning Finished Goods Inventory on October 1. It transferred in $849,000 of units completed during the period. The ending Finished Goods Inventory balance on October 31 was $170,200. The entry to account for the cost of goods sold in October is: Multiple Choice Debit Cost of Goods Sold $849,000; credit Finished Goods Inventory $849,000. Debit Cost of Goods Sold $851,300; credit Work in Process Inventory $851,300. Debit Finished...

The four major types of inventory are: excess inventory, WIP inventory, finished goods inventory, and MRO...

The four major types of inventory are: excess inventory, WIP inventory, finished goods inventory, and MRO inventory. A True B False

1.Explain how manufacturing costs flow through the various accounts to wind up in Finished Goods Inventory....

1.Explain how manufacturing costs flow through the various accounts to wind up in Finished Goods Inventory. 2.What causes the Manufacturing Overhead account to be under or over applied (allocated) and what steps, if any, are taken to clear the balance at the end of the accounting period?

What is the difference between variable and absorption cost per unit? Why might a company use...

What is the difference between variable and absorption cost per unit? Why might a company use absorption costing instead of variable costing? Why might it use variable costing instead of absorption costing? Which produces the correct product cost, absorption or variable costing?

In a production budget, if the number of units in finished goods inventory at the end...

In a production budget, if the number of units in finished goods inventory at the end of the period is less than the number of units in finished goods inventory at the beginning of the period, then the expected number of units sold is less than the number of units to be produced during the period.

If finished goods inventory increases between the beginning and the end of the year, then the...

If finished goods inventory increases between the beginning and the end of the year, then the cost of goods sold is smaller than the cost of goods manufactured. true or false

Subjects