To discourage producing for inventory, management can ________.
A) discourage using nonfinancial measures such as units in ending inventory compared to units in sales as nonfinancial measures may not be congruent with management performance goals
B) evaluate performance over a quarterly period rather than a single year
C) develop budgeting and planning activities that reduce management's freedom to inappropriately build inventory through increased production
D) implement absorption costing across all departments

Question

Quizplus · Accepted Answer

Developing budgeting and planning activities that reduce management's freedom to inappropriately build inventory through increased production can discourage producing for inventory. This can include setting targets for inventory levels and implementing controls to prevent overproduction. Option A is incorrect as nonfinancial measures can still be useful in assessing performance. Option B may not be effective in discouraging producing for inventory as it only changes the evaluation period. Option D is also incorrect as absorption costing can incentivize overproduction as fixed overhead costs are allocated to units produced.

To Discourage Producing for Inventory, Management Can ________