Make a note of the absorption costing net operating income (loss) in Year 2.
At the end of Year 1, the company’s board of directors set a target for Year 2 net operating income of $0 under absorption costing. If this target is met, a large bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 4,000 units.
Would this change result in a bonus being paid to the CEO?
multiple choice 1
Yes
No
What is the net operating income (loss) in Year 2 under absorption costing?