Lydia owns a railroad company in Belgium and acts as a monopolist. Each train has two types of seats on its trains: business class and economy class. All of the customers prefer business class seats to economy class seats; however, price-sensitive people choose to buy the economy seats. Lydia is able to buy seat cushions that she could install in economy class that would increase the economy class consumers' willingness to pay for economy class by more than the cost of installing the cushions. What will happen to Lydia's profits when she installs the cushions? Choose only one.1. Lydia will increase her profits by installing the cushions2. Lydia will decrease her profits by installing the cushions3. Lydia's profits will be unchanged by installing the cushions4. The answer is ambiguous

Activity-based costing (abc) is not truly a cost collection mechanism as much as it is an inventory valuation method. the main purpose for implementing an activity-based cost system is to try to overcome some of the cost distortions that occur in traditional costing from product differences when there are variations in size and complexity. however, one of the disadvantages of utilizing abc is that the additional information gathering necessary to implement costing with that level of detail might be beyond the reach of some companies with resource or financial constraints. with this in mind, what kinds of industries or companies do you think would benefit most from using activity-based costing and why? in designing or modifying an accounting system to capture appropriate costs for abc, what considerations do you think would need to be made?