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Evaluating and rewarding managers based on absorption basis income can lead to overproduction. true or false

1 Answer

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Answer:

True

Step-by-step explanation:

The absorption basis of income, profits are always high when the production is greater than income because more fixed costs will have been deferred in closing inventory.

So, managers will focus more on increasing production which create huge balances of closing stocks and consequently results in large profits.

answered
User Jesse Crossen
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