Managers who are paid a bonus that is a function of gross margin may be inspired to
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Question:
Managers who are paid a bonus that is a function of gross margin may be inspired to produce a product in excess of demand to maximize their own bonus. There are metrics to discourage managers from producing products in excess of demand. Do you think the following metrics will accomplish this objective? Show your work.
a Incorporate a charge of of the cost of the ending inventory as an expense for evaluating the manager.
b Include nonfinancial measures when evaluating management and rewarding performance.
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0136126638
13th Edition
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav
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