1 What are costs ulia zing whether repair and types of repai

1. What are costs ulia zing whether repair and types of repair and support services? 2. Would variable or absorption costing be more useful to Google in anal puter services? Are these port services are profitable? BTN 19-3 FDP Company produces a variety of home security products. Gary Price, the c dent, is concerned with the fourth quarter market demand for the company\'s products. Unless done in the last two months of the year, the company is likely to miss its earnings expec analysts. Price still remembers when FDP\'s earni Price, the company\'s prai ings were below analysts\' expectation by t years ago, and the company\'s share price fell 19% the day earnings were annou ing, Price told his top management that something must be done quickly. One proposal by the marketing ric president was to give a deep discount to the company\'s major customers to increase the company\'s sales nte fourth quarter. The company controller pointed out that while the discount could increase sales, it may n elp the bottom line; to the contrary, it could lower income. The controller said, \"Since we have enough sto ge capacity, we might simply increase our production in the fourth quarter to increase our reported proit equired nced. In a recent mees three . Gary Price is not sure how the increase in production without a corresponding increase in sa sales could hip boost the company\'s income. Explain to Price how reported income varies with respect to p . Is there an ethical concern in this situation? If so, which parties are affected? Explain. TN 19-4 Mertz. Chemical has three divisions. Its consumer product division om companies overseas. During its recent teleconferenco RuL anager, reported that his di oduct division faces strong competi

Solution

1.Under full costing or absorption costing that is normally adopted, Increase in production level, will help to spread the fixed costs to the closing unsold inventory in hand , and thus takes that part of the expenses out of the Income statement for the year and presents an increased profit /net income figure. So,lesser fixed expenses appear in the income statement of the year , even though there is no corresponding increase in sales as with production 2..The ethical concern in the whole issue, is that putting too much pressure on the production team, not having focussed or planned enough on bifurcated weekly,monthly or quarterly sales targets, just because there is spare production- capacity In the above case, the production team will be adversely affected & pressurised to work much more harder ,in the very limited time of one quarter. Or else, if it is offering heavy discounts, this may put pressure on the sales people to sell without recovering adequate sale value. Also the sales people\'s target on which their commissions may be very low The customers may be enticed/pressurised to purchase from the company which is bound to bring dis-repute to the company.