Absorption costing net operating income

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At the end of year 1, the company's board of directors set a target for Year 2 of net operating income of $500,000 under absorption costing. If this target is met, a hefty 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 50,000 units. Would this change result in a bonus being paid to the CEO? Do you think this change would be in the best interests of the company? What is likely to happen in Year 3 to the absorption costing net operating income if sales remain constant at 12,000 units per year?

Reference no: EM133240034

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