Reference no: EM132746917

Problem 1: Morton Graphics successfully bid on a job printing standard notebook covers during the year using last year's price of $0.27 per cover. This amount was calculated from prior year costs, noting that no changes in any costs had occurred from the past year to the current year. At the end of the year, the company manager was shocked to discover that the company had suffered a loss. "How could this be?" she exclaimed. "We had no increases in cost and our price was the same as last year. Last year we had a healthy income." What could explain the company's loss in income this current year?

a. Their costs were all variable costs and the amount produced and sold increased.

b. Their costs were mostly fixed costs and the amount produced this year was less than last year.

c. They used a different cost object this year than the previous year.

d. Their costs last year were actual costs but they used budgeted costs to make their bids.