To avoid providing an incentive for managers to engage in intentional LIFO liquidation,bonus contracts should subtract out LIFO liquidation profits.

Question

Quizplus · Accepted Answer

By subtracting out LIFO liquidation profits from bonus contracts, managers have reduced motivation to engage in intentional LIFO liquidation, as doing so would not increase their bonus payments. This helps to ensure that LIFO liquidation decisions are based on legitimate reasons, such as changes in inventory demand or production processes, rather than on artificial incentives.

To Avoid Providing an Incentive for Managers to Engage in Intentional