Evaluating and rewarding managers based on absorption costing income can lead to overproduction.

Name: Evaluating and rewarding managers based on absorption costing income can lead to overproduction.
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Absorption costing includes fixed overhead costs in the cost of production, which means that producing more units will increase the reported income. This can incentivize managers to produce more than necessary in order to increase their reported income and potentially earn higher rewards or bonuses.

Evaluating and Rewarding Managers Based on Absorption Costing Income Can