Michael Cohen is a refrigerator factory manager. Suppose:
Manufacturing costs for a new QR refrigerator consist entirely of fixed manufacturing overhead costs $ regardless of the production level
Michael receives a yearend bonus of on the plant's net income based on the 'traditional' income statement IS
A company focus group indicates initial sales for the QR refrigerator in the next year will be unit for $
OPTION Produced unit; sold unit
OPTION Produced units; sold unit
Because Michael is not very comfortable with numbers, he consults with his personal accountant you about what he should choose.
Explain your answer as though you are talking to Michael, your client via a video that explains:
How will each option impact the 'traditional' IS of Company XYZ
How will each option impact Michael's end of year bonus based on the 'traditional' IS
Which option would maximize Michael's wealth?
