Bonus plans should be tied to variable cost income, which is less subject to manipulation because is not affected by inventory level changes, rather than the conventional:
A) Tax-based net income.
B) Marginal cost income.
C) Full cost income.
D) Operating income.

Question

Quizplus · Accepted Answer

Full cost income can be easily manipulated by changes in inventory levels and may not reflect the true performance of the company. Tying bonus plans to variable cost income ensures that the company is truly profitable and incentivizes employees to focus on cost control and efficient operations. Tax-based net income and operating income can also be subject to manipulation and may not accurately reflect the financial situation of the company. Marginal cost income is not a commonly used financial metric for performance evaluation.

Bonus Plans Should Be Tied to Variable Cost Income, Which