Before you answer the question please read this article. Here's the Title for the Article: Drivers and Consequences of Short-Term Production Decisions: Evidence from the Auto Industry* ALEXANDER BRU GGEN, Maastricht University RANJANI KRISHNAN, Michigan State University KAREN L SEDATOLE, Michigan State University

After reading the following article, you are expected to prepare a written report: Brggen, A., Krishnan, R., & Sedatole, K. L. (2011). Drivers and Consequences of ShortTerm Production Decisions: Evidence from the Auto Industry. Contemporary Accounting Research, 28(1), 83-123 This article contains field interviews with managers of a Big Three U.S. automaker and highlights circumstances under which improper accounting for the fixed overhead costs of excess capacity coupled with a short-term focused performance evaluation system can result in overproduction. In your report, you are expected to ask the following questions:

Why might managers build up finished goods inventory if they use absorption costing?

What are the opportunities and challenges of developing a dual-inventory costing system for both internal and external reporting and performance evaluation?

Can we develop and revise a performance evaluation system which discourages behavior that benefits managers but not the company?